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

53 Pages Posted: 16 Nov 2018 Last revised: 29 Mar 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: March 14, 2019

Abstract

In 2016, the Securities and Exchange Commission increased tick size for 1,200 randomly selected firms and imposed restrictions on dark-pool trading on 400 of them. We find that firms reduce share repurchases by 67% and reduce total payouts by 50% when they face constraints in both stock exchanges and dark pools. Surprisingly, firms with larger increases in depth reduce their payouts more because rule 10b-18 discourages issuers from using market orders, turning a market with great depth into an illiquid market for them. The conflicts between rule 10b-18 and the newly imposed trade-at rule also contribute to reductions in payouts.

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 (March 14, 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

Register to save articles to
your library

Register

Paper statistics

Downloads
114
rank
237,612
Abstract Views
756
PlumX Metrics