How the book value of shares will get affected by paying dividend?
They don’t.
The book value of retained earnings does.
Technically, the book value of equity (via retained earnings) decreases when the dividend is _ declared _, not when it is paid.
Wouldn’t logic suggest that if book value per share is equal to equity divided by number of shares, and that if equity equals assets minus liabilities, if a company pays out cash dividends, therefore reducing its assets (cash) and reducing its equity (retained earnings) then book value per share would fall?
Yes.
However, as I wrote above, it occurs when the dividend is declared (whereupon retained earnings (equity) decreases and dividends payable (liability) increases), not when the dividend is paid.
Thanks for the additional info. I guess that is the “accrual accounting” at work, such that expense is recognised at the time of declaration rather than the payment of cash.
my previous comment was more in response to MrSmart when he said book value of shares aren’t affected by paying dividends, I was just saying logic suggests it is affected as BVPS is reduced