Market Structure and Corporate Payout Policy: Evidence from a Controlled Experiment

56 Pages Posted: 16 Nov 2018 Last revised: 7 Jul 2019

See all articles by Xiongshi Li

Xiongshi Li

Guangxi University

Mao Ye

University of Illinois at Urbana-Champaign; National Bureau of Economic Research (NBER)

Miles Zheng

University of Illinois at Urbana-Champaign - Department of Finance

Date Written: June 17, 2019

Abstract

In 2016, the Securities and Exchange Commission (SEC) increased tick size for 1,200 randomly selected firms. We find tick-constrained firms reduce repurchase payouts by 45% during the two-year pilot period. Their dividend payouts do not change much, total payouts reduce by 31% and payout structure changes from repurchase-dominating towards half-half. In contrast, unconstrained firms do not experience significant changes in payouts. The conflicts between rule 10b-18 and the newly imposed trade-at rule which restricts dark-pool trading for test group 3 contribute to a larger reduction in repurchases. The effect of the pilot on share repurchases reverts after Pilot ends.

Keywords: tick size, dark pool, payout policy, regulation, market liquidity

JEL Classification: G10, G18, G35

Suggested Citation

Li, Xiongshi and Ye, Mao and Zheng, Miles, Market Structure and Corporate Payout Policy: Evidence from a Controlled Experiment (June 17, 2019). Available at SSRN: https://ssrn.com/abstract=3254585 or http://dx.doi.org/10.2139/ssrn.3254585

Xiongshi Li

Guangxi University ( email )

East Daxue Road #100
Nanning, Guangxi 530004
China

Mao Ye (Contact Author)

University of Illinois at Urbana-Champaign ( email )

406 Wohlers
1206 South 6th Street
Champaign, IL 61820
United States
2172440474 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Miles Zheng

University of Illinois at Urbana-Champaign - Department of Finance ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

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