Price ceilings, market structure, and payout policies

• 成果类型: Article
• 署名作者: Li, Xiongshi; Ye, Mao; Zheng, Miles
• 署名单位: Guangxi University of Finance & Economics; Cornell University; National Bureau of Economic Research; Texas Christian University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2024.103818
• 发表日期: 2024
• 关键词: Market structure; Share Repurchase; Queue Competition; Dark Pool; regulation

摘要

To prevent issuers from inflating their share prices, SEC Rule 10b-18 sets price ceilings on share repurchases through open markets. We find that market-structure reforms in the 1990s and 2000s dramatically increased share repurchases because they relaxed constraints on issuers competing with other buyers under price ceilings. The Tick Size Pilot Program, a controlled experiment that partially reversed previous reforms, significantly reduced share repurchases. We estimate that price ceilings and reduced market-structure frictions explain 18% of the secular increase in share repurchases. Meanwhile, these two frictions still exist, which explains why share repurchases have not crowded out dividends entirely.