Does Better Liquidity for Large Orders Attract Institutional Investors and Analysts?Evidence from the Tick Size Pilot Program

Based on SEC’s Tick Size Pilot Program, we hypothesize and find that the improved liquidity for large orders disproportionately reduces the execution cost of institutional investors and thus increases their ownership of the treated firms with a larger tick size during the pilot program. The effect is concentrated among firms with lower liquidity for large orders ex-ante and mainly comes from dedicated investors and quasi-indexers. We also find that analyst coverage and forecast accuracy increase for the treated firms, plausibly catering to the increased information demand of institutional investors