Why do companies give bonus share?

Well, there may be various reasons for this. Let’s check them one by one:-
1. To reward their investors-
The Company pays gratitude  to its investors in the  form of giving a bonus share. Also the morale of the shareholder gets boosted and the company gains the confidence of the investors.
2. To increase liquidity of the stock-
By offering bonus shares, the total number of outstanding shares increases- which increases the trading – thus resulting in the increased liquidity of the stock and increased participation of the traders. Also, it benefits the company as people buy more and more stocks in a hope to get free shares and  this increases the chance of additional fundraising through stake buying.
3. To bring the stock price in a reasonable price range-
Whenever any company issues bonus shares then its stock price adjusts after the record date. So, the stock price drops down and trades in a bit affordable price range, which then gains the attraction of the investors who could not buy because of high stock price. So, ultimately it proves beneficial for the company.