We develop a dynamic model of a limit order market populated by strategic liquidity traders of varying impatience. In equilibrium, patient traders tend to submit limit orders, whereas impatient traders submit market orders. Two variables are the key determinants of the limit order book dynamics...

We argue that dividend stickiness, the tendency of managers to keep dividends unchanged, implies that managers use a partially pooling dividend policy. We offer a model that demonstrates how such a policy can evolve endogenously in equilibrium. An informed manager who cares about the firm's...

We study the effect of the Global Analyst Research Settlement and related regulations on sell-side research. These regulations attempted to mitigate the interdependence between research and investment banking. We document that following the regulations many brokerage houses have migrated from...

We consider the choice between stocks and options to provide effort incentives to a risk-averse manager. We show that stocks can dominate options as a means of motivation only if nonviability risk is substantial, as in financially distressed firms or start-ups. Options dominate stocks for other...

The institutional brokerage industry faces an ever-increasing pressure to lower trading costs, which has already driven down average commissions and shifted volume toward low-cost execution venues. However, traditional full-service brokers that bundle execution with services remain a force and...

We study the effects of the controlling shareholders' portfolio diversification on the initial public offering (IPO) process. Less diversified shareholders have more to gain from taking their firm public, and are more willing to accept a lower price for shares. We test these hypotheses using the...

We develop a model in which limit order traders possess volatility information. We show that in this case the size of the bid-ask spread is informative about future volatility. Moreover, if volatility information is in part private, we establish that (i) the size of the bid-ask spread and (ii)...

This article presents a model of information monitoring and market making in a dealership market. We model how intensively dealers monitor public information to avoid being picked off by professional day traders when monitoring is costly. Price competition among dealers is hampered by their...

Competition among trading platforms has considerably reduced trading fees in stock markets. We show that this evolution is not necessarily beneficial to investors. Although they increase gains from trade when a trade happens, lower trading costs can induce investors to post limit orders with a...

Cross-listed firms in the United States have a higher investment-to-price sensitivity than do firms that never cross-list. This difference is strong, does not exist prior to the cross-listing date, and does not vanish afterward. Moreover, it does not appear to be primarily driven by improvements...