Stock splits, tick size, and sponsorship

Authors
Citation
P. Schultz, Stock splits, tick size, and sponsorship, J FINANCE, 55(1), 2000, pp. 429-450
Citations number
27
Categorie Soggetti
Economics
Journal title
JOURNAL OF FINANCE
ISSN journal
00221082 → ACNP
Volume
55
Issue
1
Year of publication
2000
Pages
429 - 450
Database
ISI
SICI code
0022-1082(200002)55:1<429:SSTSAS>2.0.ZU;2-V
Abstract
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.