Stock splits, tick size, and sponsorship

A traditional explanation for stock splits is that they increase the number of small shareholders who own the stock. A possible reason for the increas e is that the minimum bid-ask spread is wider after a split and brokers hav e more incentive to promote a stock. I document a large number of small buy orders following Nasdaq and NYSE/AMEX splits during 1993 to 1994. I also f ind strong evidence that trading costs increase, and weak evidence that cos ts of market making decline following splits. This is consistent with split s acting as an incentive to brokers to promote stocks.