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Algorithms leave but insiders arrive: evidence from the tick size pilot
Chen Lin
Uni Mannheim, Germany
Discussant: Moritz Wiedemann (Erasmus University, Rotterdam School of Management)
I find that corporate insiders benefited from a temporary reduction in algorithmic trading during the SEC Tick Size Pilot Program. Insider purchase quantities increased by approximately 30% during the program without compromising quality, and reversed once the program ended. Using algorithmic trading proxies from the SEC Market Information Data Analytics System, I show that the effects were concentrated in stocks with above-median pre-pilot algorithmic trading activity. These findings highlight that microstructure shocks exert material impacts of informed insider trading.
12:00pm - 12:30pm
Watchdog or mouthpiece? The role of financial news media in corporate communication
Noah Urban1, Martin Hibbeln1, Henrik Müller1, Ralf Metzler2
1University of Duisburg-Essen, Germany; 2TU Dortmund University, Germany
Discussant: Chen Lin (Uni Mannheim)
We investigate how financial news media coverage causally affects managers’ manipulation decisions in corporate disclosures. While prior research shows that media coverage decreases manipulation incentives for “hard manipulation”, such as accounting fraud (“watchdog role”), the role of the media for manipulating qualitative information, “soft manipulation”, is ex-ante unclear; theory even predicts that news media may uncritically disseminate corporate information (“mouthpiece role”), thereby increasing managers’ incentives for soft manipulation. Using a stacked difference-in-differences design based on restructuring events at the Wall Street Journal, we provide first empirical evidence that news media coverage reduces managers’ incentives for soft manipulation. The effect is driven by articles with more editorial content and more pronounced for firms with less monitoring through other corporate governance mechanisms.
12:30pm - 1:00pm
Green stewards: Responsible institutional investors foster green capex
Moritz Wiedemann
Rotterdam School Of Management, Erasmus University
Discussant: Ralf Metzler (University of Duisburg-Essen)
This paper examines whether responsible institutional investors affect corporate green capital expenditures. I identify responsible investors via the Climate Action 100+ initiative and measure green capital expenditures with green debt issuance. Given regional differences in investor sustainability preferences, I exploit the cross-listing of European and Asian firms in the United States as negative responsible ownership shock. A staggered difference-in-differences estimation shows that cross-listing firms have lower responsible ownership and decrease green capital expenditures post cross-listing. Lower responsible ownership is also associated with lower green governance. Together, my findings suggest that responsible investors drive green capital expenditures by influencing corporate decision-making.
