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.
The public company has historically been a crucial element of the American economy. Various predictions have been made recently that the public company’s future is bleak. This essay maintains these gloomy conjectures are erroneous. Companies...Read more
We find that corporate giving as a private benefit of control distorts investment and financing decisions, results supporting Jensen’s (1986) free cash flow theory. These investment distortions reduce shareholder wealth, especially in cash-...Read more
This paper analyzes how trading after shareholder meetings changes the composition of the shareholder base. Using data on daily trades we find that mutual funds reduce their holdings if their votes are opposed to the voting outcome. Trading...Read more
We study a wide-spread yet unexplored corporate governance phenomenon: the pledging of company stock by insiders as collateral for personal bank loans. Utilizing a regulatory change that exogenously decreases pledging, we document a negative...Read more