We investigate competition between traditional stock exchanges and new ?dark? trading
venues using an important difference in regulatory treatment. SEC required minimum pricing increments constrain some stock spreads, causing large limit order queues. Dark pools allow some traders to by-pass existing limit order queues with minimal price improvement.
Using a regression discontinuity design, we find spread constraints significantly weaken exchanges? competitiveness. As more orders migrate to dark pools,
the probability of subsequent order execution there increases, raising liquidity. The ability
to circumvent time priority of displayed limit orders is one cause of the rapid rise in U.S.
equity market fragmentation.
Stricter enforcement of manager post-employment restrictions that strengthen trade secrets protections also limits managers’ ability to accept better employment opportunities. We find that heightened managerial career concerns due to these...Read more
This article surveys the recent literature on boards of directors and the interplay between director incentives and CEO incentives. The primary focus is on how the incentives and other characteristics of directors, boards and CEOs interact to...Read more
Mechanisms of market inefficiency are some of the most important and least understood institutions in financial markets today. A growing body of empirical work reveals a strong and persistent demand for “safe assets,” financial instruments that...Read more
This study examines the challenge of implicit communications - qualitative statements, tone, and non-verbal cues - to the effectiveness of enforcing corporate disclosure regulations. We use Regulation FD setting, given that SEC adopted the...Read more