Market microstructure around three corporate announcements.

摘要

This thesis examines various aspects of the market microstructure around three important corporate events. These important corporate events are stock splits, corporate acquisitions and earnings announcements.;The third chapter (second essay) investigates the microstructure effects of acquisitions. The intensification of trading activity upon announcement of such offers is more dramatic for targets than for bidders. Investors are more inclined to sell targets upon announcement using direct market orders against ask limit orders when the tender offers involve cash due to portfolio rebalancing and profit realization motives. Liquidity improves for targets with a fall in trading costs, and with an increase in quoted dollar and share depth. Both trading costs and quoted depth fall continuously over the tender offer cycle to successful completion for the acquirers. Increased trading causes the temporary trading cost to fall farther for targets than for acquirers. Permanent trading costs decline over the tender offer cycle, and especially for targets for cash tender offers and for acquirers for share tender offers. These findings based on method of payment are related to the good and bad news, respectively, that are revealed by the announcement and realization of the tender offer, respectively.;The fourth chapter (third essay) analyzes trading on the various trading venues for Canadian firms that are cross-listed on the main US trading venues around earning announcement dates. We first show that the Canadian trading venues lost their trade advantage in terms of trade cost compared to their US counterparts for trading Canadian cross-listed shares. However, the Canadian market still retains the dominant part of trade volume and Canadian dealers offer greater market depth. There is also no preference ordering among the top three US listing venues for Canadian shares based on trade cost. Both trading legs have similar proportions of informed trading during off-announcement days. They both react simultaneously to earnings news. However, on announcement day, most informed traders trade on the domestic Canadian market. We claim that the domestic Canadian market is much more informative during announcement dates than its US competitors.;The second chapter (first essay) investigates the microstructure effects of stock splits. We find that the price range theory explains the stock splits of high price stocks and information plays an essential role in the explanation of stock splits for low price stocks. While global liquidity decreases post-split, trading activity as measured by the number of trades increases. The temporary component of the spread increases while the directional change for the permanent component is indeterminate. Uninformed traders intensify their trading activities relatively more than informed traders after stock splits. While the probability of new information arrival remains unchanged, the probability of a bad event and of informed trading decreases after stock splits. In addition, temporary volatility increases while true price volatility decreases post-split. Consistent with the extant literature, stock splits attract small or uninformed traders. Whether attracted by the lower per-share price, the newly promoted stock or the decrease in the probability of informed trading, uninformed traders are the essential cause of the increase in trading activity, trading cost and return volatility after stock splits.