@article{19eb0cbc1a7445d3bef399f6925bbd96,
title = "Price ceilings, market structure, and payout policies",
abstract = "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.",
keywords = "Dark Pool, Market Structure, Queue Competition, Regulation, Share Repurchase",
author = "Xiongshi Li and Mao Ye and Miles Zheng",
note = "Philipp Schnabl was the editor for this article. We gratefully acknowledge helpful comments from the editor and an anonymous referee. We thank Heitor Almeida, Jim Angel, Dion Bongaerts, Eric Budish, John Campbell, Raj Chetty, Tarun Chordia, Gregory Eaton, Amy Edwards, Harry Feng, Slava Fos, John Friedman, Robin Greenwood, Gustavo Grullon, Sam Hanson, Joel Hasbrouck, Jiekun Huang, Steven Ho, Mathias Kronlund, Pete Kyle, Mark Leary, Yoon Kang Lee, Mark Loewenstein, Neil Pearson, George Pennacchi, Joshua Pollet, Jeffrey Pontiff, Jim Poterba, Amir Rubin, Gideon Saar, Martin Schmalz, Antoinette Schoar, Paul Schultz, Beibei Shen, Ji Shen, Andriy Shkilko, Jeff Smith, Elvira Sojli, Chester Spatt, Adi Sunderam, Alexei Tchistyi, Anjan Thakor, Kumar Venkataraman, Theo Vermaelen, Scott Weisbenner, Russell Wermers, Ingrid Werner, Toni Whited, Yufeng Wu, Yuhai Xuan, Liu Yang, Chen Yao, Bart Yueshen, and participants at Arrowstreet Capital, Boston College, Case Western Reserve University, Emory University, the George Washington University, Harvard Business School, INSEAD, the University of British Columbia, the University of Hong Kong, the University of Illinois, the University of Iowa, the University of Maryland, the University of Michigan, the Cornell University Market Microstructure Ph.D. Seminar, Microstructure Exchange, Guanghua International Symposium, CICF, EFA, NFA, the WRDS Advanced Research Scholar Program, the SAFE Market Microstructure Meeting, the Sydney Market Microstructure Meeting, and the ITAM Finance Conference for helpful suggestions. Ye acknowledges support from National Science Foundation grant 1838183 and the Extreme Science and Engineering Discovery Environment (XSEDE). We remain responsible for all errors and omissions.",
year = "2024",
month = may,
doi = "10.1016/j.jfineco.2024.103818",
language = "English (US)",
volume = "155",
journal = "Journal of Financial Economics",
issn = "0304-405X",
publisher = "Elsevier B.V.",
}