Why do stock prices change on the ex-date of a corporate action?

Stock prices change on the ex-date because the entitlement to a corporate action benefit no longer transfers to new buyers from that day onward. As a result, the market adjusts the stock price to reflect the value of the benefit that has been separated from the share.

For dividends: The share price typically falls by the dividend amount since buyers after the ex-date are not entitled to receive the payout.

For bonus issues or stock splits: The price adjusts downward in proportion to the increased number of shares.

For rights issues: The price may realign to account for the discounted shares being offered to eligible shareholders.

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