Algorithmic Trading and Changes in Firms’ Equity Capital
Singapore Management University - Lee Kong Chian School of Business
Kingsley Y. L. Fong
University of New South Wales - School of Banking and Finance; Financial Research Network (FIRN)
Juan (Julie) Wu
University of Nebraska at Lincoln
November 12, 2012
FIRN Research Paper
We use a large sample from 2001 to 2009 that incorporates intraday transactions data from 39 exchanges and an average of 12,800 different common stocks to assess the effect of algorithmic trading (AT) on firms’ capital raising activities. Greater AT reduces net equity issues over the next year, but this is only partly driven by AT’s effect on proceeds from new securities issues. Our findings suggest that the main driver of this relationship is AT’s effect on share repurchases.
Number of Pages in PDF File: 36
Keywords: Algorighmic trading, high frequency trading, capital raising, security issues
JEL Classification: G10, G15, G32
Date posted: May 6, 2012 ; Last revised: February 5, 2013
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