Back in the old days, people routinely bought and sold stocks in blocks of 100 shares. So if a company’s stock prices got a little high they would look at doing stock splits. For example, ABC Company’s stock is trading at $100 s a share. So a block of shares for ABC Company would sell for $10,000. But if ABC does a stock 2 for 1 split, all the stockholders would have twice as many shares, and the shares would be worth half as much. So if John owned 100 shares of ABC and they were worth $100 each, after the stock spit, John would own 200 shares of ABC, and the would be worth $50 each. So the value of his stock holdings would remain the same. But now a block of 100 shares of ABC Company stock only costs $5,000. Many people would find it easier to come up with $5,000 than $10,000.
So stock splits have a psychological effect on the stock market. Many people see a $50 stock as cheaper than a $100 and are more likely to buy it. When in reality, the price of a share stock has nothing to do with it’s value. $1000 worth of $50 shares is worth the same as $1000 worth of $100. But some people seem to think that since they are getting more shares, they are getting a better deal. So by lower the stock price through stock splits, a company may increase the activity of it’s stock.
Besides 2 for 1, stock splits also occur in ratios of 3 for 1, and 3 for 2. But they also occasionally occur in 4 for 3, and 5 for 2.
Some people believe that following stock splits, stock prices will have a tendency to return to the pre-split price. So a stock splitting from $100 to $50, will tend to return to $100. But now people own twice as many shares.
Also, a companies performing stock splits are shwoing confidence in their stock, that they believe the current price is warrented, and will likely to go higher.

There are reverse stock splits. If a company’s stock price gets too low, a company may opt for a resverse stock split. Let’s say the XYZ’s stock has dropped to $2 a share. It kind of makes the copany look low rent, or unwanted. To give a psychological boost to the company they perform a 1 for 10 reverse stock split. This means that stock holders that owned 1000 shares at $2 each, now would own 100 shares worth $20 each. So the value of their stock holdings remains the same.