The Effects of Stock Splits on Clientele: Is Tick Size Relevant?

Posted: 20 Nov 2006

See all articles by Marc L. Lipson

Marc L. Lipson

University of Virginia - Darden School of Business

Sandra Mortal

University of Alabama - Culverhouse College of Commerce & Business Administration

Multiple version iconThere are 2 versions of this paper

Abstract

We explore whether the relation between stock splits and clientele is driven by binding tick sizes. We find little evidence that firms adjusted prices to maintain similarly binding tick sizes as the NYSE reduced tick sizes. Furthermore, though splits that increase the extent to which tick sizes are binding are associated with greater increases in spreads, these splits experience similar changes in measures related to clientele, including trade size, breadth of individual and institutional ownership, and analyst following. We find little evidence supporting theories, such as spread-induced sponsorship, that rely on binding tick sizes to link splits and clientele.

Keywords: Stock splits, Tick size, Clientele

JEL Classification: G30, G10

Suggested Citation

Lipson, Marc Lars and Mortal, Sandra, The Effects of Stock Splits on Clientele: Is Tick Size Relevant?. Journal of Corporate Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=893152

Marc Lars Lipson (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4837 (Phone)
434-243-5021 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/lipson.htm

Sandra Mortal

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States

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