A 1996 study by David Ikenberry of Rice University measured the short and long-term performance of stock splits. His research included all the 1,275 companies whose stock split 2-for-1 between 1975 and 1990. Mr. Ikenberry compared the split stocks to a control group of stocks for similar-sized companies in similar sectors that had not split. His results were startling. The split stock group performed 8% better than the control group after one year, and 16% better after three years.
A cheaper stock is always more attractive to investors than more expensive stock.
How many people here can afford a Berkshire Hathaway share? :) I believe price is around 150.000/share. Yes there are now B shares, bit cheaper but that wasn't always the case.
It's also a perception issue, since people feel they get more bang for buck by buying cheaper shares. People also perceive the downside risk as more limited and upside risk as bigger if shares are cheaper.
I remember Cramer explaining to his audience on CNBC Apple is cheap at 300-400$. Thing is lots of people need plenty of explaning and still don't get it.
Bottom line: Stocksplits create more value for stockholders.