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Why do only some Nasdaq firms switch to the NYSE? Evidence from corporate transactions

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  • Kedia, Simi
  • Panchapagesan, Venkatesh
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    Abstract

    Every year only a small fraction of Nasdaq firms that are eligible to move to the NYSE actually choose to move. This is surprising as prior literature documents significant gains to listing on NYSE. Gains in visibility and liquidity associated with a move to NYSE reduce the firm's cost of capital. Consequently, firms are more likely to move to NYSE when they are raising external financing or engaging in acquisition activity. We study a set of corporate transactions - issue of debt, equity and involvement in acquisitions - for a group of Nasdaq firms that chose to move to the NYSE and a size and industry-matched control group over the period 1986-1998. We find that firms that move to the NYSE issue more debt and equity, and engage in more asset transactions following their move relative to control firms. Our results suggest that the listing decision of a firm is often not isolated, but rather related, to other important corporate objectives of the firms.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Markets.

    Volume (Year): 14 (2011)
    Issue (Month): 1 (February)
    Pages: 109-126

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    Handle: RePEc:eee:finmar:v:14:y:2011:i:1:p:109-126

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    Web page: http://www.elsevier.com/locate/finmar

    Related research

    Keywords: Exchange listing Debt issues Acquisitions Cost of capital;

    References

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    1. Reinganum, Marc R., 1990. "Market microstructure and asset pricing : An empirical investigation of NYSE and NASDAQ securities," Journal of Financial Economics, Elsevier, vol. 28(1-2), pages 127-147.
    2. Arnold R. Cowan & Richard B. Carter & Frederick H. Dark & Ajai K. Singh, 1992. "Explaining the NYSE Listing Choices of NASDAQ Firms," Financial Management, Financial Management Association, vol. 21(4), Winter.
    3. Bhardwaj, Ravinder K & Brooks, LeRoy D, 1992. "Stock Price and Degree of Neglect as Determinants of Stock Returns," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 15(2), pages 101-12, Summer.
    4. Amihud, Yakov & Mendelson, Haim, 1986. "Asset pricing and the bid-ask spread," Journal of Financial Economics, Elsevier, vol. 17(2), pages 223-249, December.
    5. H. Kent Baker & Gary E. Powell & Daniel G. Weaver, 1999. "Does NYSE Listing Affect Firm Visibility?," Financial Management, Financial Management Association, vol. 28(2), Summer.
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    Cited by:
    1. Haifeng Guo & Hung‐Gay Fung, 2011. "Growth Enterprise Board Initial Public Offerings: Characteristics, Volatility and the Initial‐day Performance," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 19(1), pages 106-121, 01.

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