Faculty of Business External Research Seminar|Finance|Asst. Prof. Khaladdin Rzayev

Faculty of Business External Research Seminar|Finance

Date: Fri, Dec 8, 2023
Time: 11:30-13:00
Location: AB2 345

Speaker: Asst. Prof. Khaladdin Rzayev
Institution: Koc University & University of Edinburgh

Title: Dark Trading and Corporate Cash Holdings

Abstract: We show that firms hold less cash when more of their shares are traded on "dark" venues. We exploit the randomized variation in dark trading generated by the trade-at rule of the Tick Size Pilot Program to establish a causal relationship. The relaxation of financial constraints and improved governance are the channels through which dark trading affects cash holdings. Dark trading is also associated with a higher value of cash. Overall, our findings suggest that dark trading enhances informational efficiency and reduces the precautionary demand for cash through lowering the cost of external financing and improving governance.