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.