We investigate the effects of an increase in tick size on order and trading flow across market fee models. Using the pilot firms in the U.S. Securities and Exchange Commission's Tick Size Pilot Program, we document that trade and order volume declines on maker‐taker fee models after the tick size implementation. We find that the inverted fee models (taker‐maker) experience an increase in both trade and order volume. Additionally, we find that a tick size adjustment has a substantial influence on market participation in maker‐taker fee models. We also find that measures of both hidden and algorithmic trading decline with an increasing tick size, which is strongly moderated by the differences in the maker‐taker and taker‐maker fee models.
Purpose
The purpose of this paper is to explain whether the level of managerial quality and growth opportunities influences the operating and return performance between single and dual class IPOs.
Design/methodology/approach
The sample includes 281 initial public offerings under a dual class share structure. This paper measures managerial ability using a score method design produced by (Demerjian et al., 2012). This paper follows (Chemmanur et al., 2011) in measuring post-IPO operating performance between dual and single-class firms. This paper follows Lyon et al. (1999) and Chemmanur et al. (2011) in measuring long-term post-IPO buy-and-hold return performance. This paper employs two measures of growth/investment using Tobin’s q and expenditures such as capital, research and development, and selling, general and administrative scaled to total assets (Daniel et al., 2016).
Findings
Firms with high-quality managers experience more underpricing than low-quality managers. Likewise, dual class firms of all manager and growth types hold less cash and leverage. Using Tobin’s q as a proxy for growth, dual class firms experience higher post-IPO operating performance regardless of managerial quality. Furthermore, the findings indicate minimal evidence that dual class firms underperform single-class IPOs, lending minimal support for the managerial entrenchment hypothesis.
Originality/value
This paper is the first to partition dual and single-class IPOs based on managerial quality and growth opportunities to test long-term differences in operating and return performance.
We analyze retail trading around both forward and reverse stock splits. While some suggest stock splits align prices in an optimal range, which results in disperse ownership with more persistent retail investor participation, Minnick and Raman suggest that the lack of retail trader participation mitigates the use of splits to align prices in an optimal range and contributes to decreased use of stock splits. We determine if stock splits still attract more retail trading as suggested by the optimal price range hypothesis. Our results suggest stock splits are not a "one size fits all" method for attracting retail traders. Whether retail trading is transitory or permanent for forward and reverse stock splits is dependent upon price.
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