Options Listing, Limited Attention and Peer Firm Value

46 Pages Posted: 9 May 2016 Last revised: 20 May 2017

See all articles by Ankit Kalda

Ankit Kalda

Indiana University - Kelley School of Business - Department of Finance

Date Written: February 11, 2017

Abstract

This paper studies the effect of listing of equity options on industry peer stock prices and firm value. I find that options listing leads to a decline in information acquisition on peer firms as investors reallocate more of their limited resources towards listed stocks at the expense of peer stocks following listing. This reallocation leads to a decline in informational efficiency and market quality for peer stocks. Further, lower informational efficiency negatively affects firm value and profitability for peer firms. Contrary to the extant literature, these findings highlight a negative externality generated by options listing on the stock market which have important implications for industry peer firms.

Keywords: Options, Options Listing, Limited Attention, Informational Efficiency, Firm Value

JEL Classification: G14, G10

Suggested Citation

Kalda, Ankit, Options Listing, Limited Attention and Peer Firm Value (February 11, 2017). Available at SSRN: https://ssrn.com/abstract=2776803 or http://dx.doi.org/10.2139/ssrn.2776803

Ankit Kalda (Contact Author)

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
153
Abstract Views
889
rank
190,003
PlumX Metrics