TY - JOUR
T1 - Margin regulation and market quality
T2 - A microstructure analysis
AU - Alexander, Gordon J
AU - Ors, Evren
AU - Peterson, Mark A.
AU - Seguin, Paul J.
PY - 2004/9
Y1 - 2004/9
N2 - We find that trading volume increases and market liquidity remains unchanged, while the adverse selection and order-processing cost components of the spread increase and decrease, respectively, after margin levels decline when stocks become margin-eligible. This evidence indicates that the information content of trades has increased, thereby improving market quality. However, no changes were detected after the 1997 regulatory reforms. These results have implications across a broad swath of corporate finance dimensions, including the (1) cost of capital, (2) public vs. private financing decision, (3) form of managerial compensation, (4) type of ownership structure, and (5) degree of shareholder monitoring.
AB - We find that trading volume increases and market liquidity remains unchanged, while the adverse selection and order-processing cost components of the spread increase and decrease, respectively, after margin levels decline when stocks become margin-eligible. This evidence indicates that the information content of trades has increased, thereby improving market quality. However, no changes were detected after the 1997 regulatory reforms. These results have implications across a broad swath of corporate finance dimensions, including the (1) cost of capital, (2) public vs. private financing decision, (3) form of managerial compensation, (4) type of ownership structure, and (5) degree of shareholder monitoring.
KW - Margin regulation
KW - Market quality
KW - Microstructure analysis
UR - http://www.scopus.com/inward/record.url?scp=2342629276&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=2342629276&partnerID=8YFLogxK
U2 - 10.1016/S0929-1199(02)00048-2
DO - 10.1016/S0929-1199(02)00048-2
M3 - Article
AN - SCOPUS:2342629276
SN - 0929-1199
VL - 10
SP - 549
EP - 574
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
IS - 4
ER -