No Par Value Stock – Definition

Cite this article as:"No Par Value Stock – Definition," in The Business Professor, updated December 14, 2018, last accessed October 21, 2020,


No-Par Value Capital Stock Definition

No Par Value stocks are issued without a par value mentioned either on the share certificate or in the issuer company’s prospectus. There is no minimum baseline for determining the value of such stocks, the prices are determined by the amounts the investors are willing to pay.

A Little More on What is No Par Value Stock

Companies may prefer issuing a no-par value stock, as it allows them to sell the shares at a higher price in future offerings. It can also results in less liability for the issuing company to the shareholders in the events of dramatical price drop. The investors generally do not mind buying a no-par value share, as the market price of share fluctuates anyway. A no-par value allows to avoid confusion over the par value and the market value of a share.

The stocks with par value may cause legal liabilities regarding the difference between the current market rate and the par value specified on the stock. The price of a no-par value is decided on the basis of the investors’ perceived value of the issuing firm. It depends on a number of factors including cash flows and competitiveness of the industry.

Companies issuing no-par value stocks debits cash account and credits the common stock account or capital share account. Thus, implicit value is assigned to the issued stocks.

However, no-par value stocks may be disadvantageous for the shareholders. If the issuing company accepts a lower price for the new issue, the value of already issued stocks get reduced, and the shareholders have to bear a loss.

Issuing no-par value stocks is illegal in the United Kingdom and in some states of the United States. It is common in Belgium, Canada and some parts of the United States.
In the states where no-par value stocks are illegal, companies issue stocks with par value set at $0.01 per share or a little more than this. These are called low-par value stock. This is done to enjoy all the benefits of the no-par value while theoretically conforming to the legal obligations.

References No Par Value Stock

Academic Research on No-par Value Capital Stock

” Watered¬†Stock“: Commissions:” Blue Sky Laws”:¬†Stock¬†without Par¬†Value, Cook, W. W. (1921).¬†Michigan Law Review,¬†19(6), 583-598. This paper explained the watered stock commission and their correlation with the blue-sky laws. However, in the course of this study, the stock without the par value was also considered.

The progress of the Law on No Par Value Stock, Wickersham, C. W. (1923). Harv. L. Rev., 37, 464. According to this study, the rate at which the law triumphs over the no par value stock was considered and the various strategies used to attain this victory was explained in the research paper.

The Dangers of Shares Without Par Value, Bonbright, J. C. (1924). Columbia Law Review, 24(5), 449-468. This study explains the effect and dangers associated with having no par value. This paper, however, does not in any form imbibe fear into those that are in this problem but rather explains how to be more efficient with the handling of shares and stocks.

Problems of Par and NoPar Shares: A Reappraisal, Israels, C. L. (1947). Colum. L. Rev., 47, 1279. According to this research paper, the problems associated with having little or no par shares, as well as the problems associated with par shares, were explained and the solutions were also given.

Stock Having No Par Value, Pierson, W. D. (1922). Ill. LR, 17, 173. This paper used the stock having no par value as a tool for explaining the dangers of stock with no par value and how this stock can move forward in the economy.

Problems of Non-Par Stock, Berle, A. A. (1925). Columbia Law Review, 25(1), 43-63. This paper explains the problems facing the non-par stock and how these problems can be eradicated.

Uses of Stock Having No Par Value, Hollen, R. H., & Tuthill, R. S. (1921). American Bar Association Journal, 7(11), 579-582. According to this study, various uses of the stocks with no par value were given. Note that because a stock has no par value does not mean it is totally useless. This paper, however, explains that in details.

Nonpar Stock-Its Use and Abuse, Ballantine, H. W. (1923). Am. L. Rev., 57, 233. This paper, unlike other academic research paper, explains the uses of the non-par stock and also explains the abuses these stocks faced in the product and capital market.

The Amount Available for Dividends Where NoPar Shares Have Been Issued, Weiner, J. L. (1929). Colum. L. Rev., 29, 906. This academic study explains the amount of the available shares for dividends in places where the no par values have been issued. A detailed explanation of this scenario was well explained in this paper.

No-Par Stock-Its Nature and Use, Goodbar, J. E. (1948). Miami LQ, 3, 1. This study focuses mainly on the uses and makeup of the no par stock. This paper explains the whole factors that form the nature of the no par values and the reasons why the no par value behave regarding several cases were also explained in this paper.

Capital stock of no par value, Hurdman, F. H. (1919). Journal of Accountancy (pre-1986), 28(000004), 246. This research paper explains the capital stock value and how they can be used to predict the anomalous behaviour of the capital market.

Shares With No Par Value, Rice, R., & Harno, A. J. (1920). Minn. L. Rev., 5, 493. This paper provides an insight into the correlation between shares and the no par values. These two entities were majorly explained then the correlation between them were studied and how they both influence the no par value was also documented in this research paper.

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