Electronic Theses and Dissertations

Date of Award


Document Type


Degree Name

Ph.D. in Business Administration



First Advisor

Bonnie Van Ness

Second Advisor

Brett Cantrell

Third Advisor

Travis Box

Relational Format



In Part 1, I study over 10,000 OTC securities that are organized into one of three tiered marketplaces (OTCQX, OTCQB, and OTC Pink) based on the quality and quantity of information a firm makes available. My analysis adds to the literature by providing a more complete picture of trading in this market. I examine determinants of trading within the tiers and compare trading metrics of the biggest return winners and losers during the sample period. I also examine if day-of-the week effects previously documented for listed securities exist in the OTC market. A large portion of these securities are penny stocks trading under five dollars per share. In Part 2, I compare penny stock behavior across price partitions and OTC marketplace tiers. I also compare market quality metrics of penny stocks trading OTC to those of listed securities priced five dollars and under. I document positive externalities resulting from the lottery-like features of penny stocks. In particular, I find that OTC penny stocks trade more often than their non-penny counterparts. However, on average, increased investor interest does not lead to an improvement in bid-ask spreads for these securities relative to non-penny OTC securities. I also find that penny stocks designated to higher information tiers are more liquid than penny stocks designated to lower information tiers. Lastly, in Part 3, I examine short interest in OTC stocks by price, tier, and stock and firm characteristics to determine the effects of transparency on short selling in the OTC market. I also study the daily return performances of securities with differing levels of short interest to determine if OTC securities behave as predicted by a theoretical model provided by Ang, Shtauber, and Tetlock (2013). I find that larger, more liquid stocks, and stocks in lower information tiers, are easier to short. Additionally, although American Depository Receipts (ADRs) tend to display higher levels of institutional participation, these securities are more difficult to short than comstocks and ordinary shares. Overall, my results provide support for studies suggesting that the difficulty shorting OTC stocks adds to the lottery-like features of OTC securities.


Emphasis: Finance

Included in

Finance Commons



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