Algorithmic trading and firm value

Brian C. Hatch, Shane A. Johnson, Qin Emma Wang and Jun Zhang

Journal of Banking & Finance, 2021, vol. 125, issue C

Abstract: Using data from 2002 to 2013, we show that algorithmic trading has a positive impact on firm value. Most of this positive impact flows through the channels of stock liquidity, idiosyncratic volatility, and idiosyncratic skewness, but algorithmic trading also has a large economic effect outside those channels. We use the advent of auto quotation on the New York Stock Exchange as an exogenous shock to algorithmic trading to rule out reverse causality. The positive effects of algorithmic trading on firm value are stronger for larger firms and in the post-2007 period when algorithmic trading intensity is higher.

Keywords: Algorithmic trading; Stock liquidity; Firm value; Volatility; Skewness (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:125:y:2021:i:c:s0378426621000480

DOI: 10.1016/j.jbankfin.2021.106090

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