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A temporary document that represents a portion of a share of stock, often issued after a stock split or spin-off.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


1. A private sector substitute for currency. Historically, scrip was used in logging and mining communities dominated by a single company, and employees had to buy goods from the company store. Presently, it is more closely associated with gift certificates, gift cards, and re-loadable debit cards. Militaries also occasionally pay soldiers in scrip when they are on deployment. In Australia, buyout offers including stock in place of or in addition to cash are known as scrip bids. See also: Money.

2. An IOU from a publicly-traded company that is short on cash. Such a company pays dividends in scrip until it resolves its liquidity problems.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


A certificate that can be exchanged for a fractional share of stock. Scrip is distributed as the result of a spinoff, a stock dividend, or a stock split in which the stockholder would be entitled to a fractional share of stock. For example, the owner of a single share would receive scrip for one-half a share in the event the issuer declared a three-for-two stock split.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.


Scrip is a certificate or receipt that represents something of value but has no intrinsic value. What's essential is that the issuer and the recipient must agree on the value that the scrip represents.

For example, in the past, after a corporate stock split or spin-off, a company might issue scrip representing a fractional share of stock for each share you owned. On or before a specific date, you could combine the certificates and convert the value they represented into full shares.

But most companies today make a cash payment for fractional shares based on the closing price of the stock on a specific date.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
It does so by comparing the financial performance of firms that issued scrip dividends over the period 1987-1992 to industry-matched control firms that paid only cash dividends.
A deeper understanding of the influences of these additional factors will enable us to understand why firms pay scrip dividends.
(1) Since scrip dividends increase the issued share capital, the total amount of dividends paid must be increased for the dividend-per-share to be increased or maintained.
(4) See Sections 230 and 249 to 251 of the Inland and Corporation Taxes Act 1988 (as amended) and Sections 141 and 142 of the Taxation of Chargeable Gains Act 1992 for the tax treatment of scrip dividends.
Recently, to alleviate this tax discrimination and to encourage tax-exempt investors to opt for scrip dividends, several companies have offered enhanced scrip dividends, whereby the basis for computing the equivalent number of shares is higher than the net cash dividend by up to 50%.
Although one year subsequent to the payment of scrip dividends may be too short a period, an extension may produce confounding effects and misspecification of long-horizon tests.
(15) I have also used other measures of cash shortage, such as interest cover and net cash flow from operations over interest paid, and find that companies that issue scrip dividends do not appear to be short of cash.
Lasfer, M.A., 1997, "Scrip Dividends: The Management's View," European Financial Management (forthcoming).
If a scrip dividend is used by managers to signal a favorable outlook to the market, then scrip-paying firms' subsequent earnings and dividends should be higher.
Table 5 reports the results from several multivariate logit regressions in which the dependent variable is one for scrip dividend firms and zero for the control firms.
I expect both these variables to be positively related to the probability of issuing a scrip dividend if this option is motivated by tax considerations.