 Algorithmic trading and block ownership initiation: An information perspectiveJiayi Zheng and Yushu Zhu The British Accounting Review, 2023, vol. 55, issue 4 Abstract: This paper examines the impact of algorithmic trading (AT) on investors' incentives to initiate block ownership in U.S. public companies. We find that a one standard deviation change in AT activity reduces the block ownership initiation likelihood by 3.5%. Using the SEC's randomised tick size pilot experiment in 2016 as a negative shock to AT, we show that the effect of AT on block ownership initiation is causal. Further evidence supports the information-hindering explanation that AT discourages sophisticated investors from acquiring information, which results in a decrease in block ownership initiation. We find that the effect of AT is more pronounced among information-sensitive investors and that institutional investors reduce their information-gathering activities in AT-targeted stocks. Additional tests exploring information-based trading behaviour in the presence of AT provide strong evidence to support the explanation of information-hindering, and our results hold across a battery of robustness tests. Keywords: Blockholder; Algorithmic trading; Ownership composition; Informed trading; Information incentive (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:bracre:v:55:y:2023:i:4:s0890838922000828 DOI: 10.1016/j.bar.2022.101146 Access Statistics for this article The British Accounting Review is currently edited by Nathan Lael Joseph and Alan Lowe More articles in The British Accounting Review from Elsevier |
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