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The rise and fall of the Amex Emerging Company Marketplace

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  • Aggarwal, Reena
  • Angel, James J.

Abstract

In 1992, the AMEX launched the Emerging Company Marketplace (ECM) to trade the stocks of small but growing companies. After listing on the ECM, stocks experienced dramatic decreases in bid-ask spreads, but showed mixed results on price and trading volume. News coverage of the ECM stocks rose significantly. Yet few firms chose to list on the new ECM, and the AMEX closed it in 1995. What went wrong? A series of scandals tarred the image of the exchange. Furthermore, auction markets historically have not fared well against dealer markets for very small firms. For some companies, it is worthwhile to subsidize the distribution channel for their stock by listing in a higher transaction cost dealer market, which gives dealers incentive to publicize the firm.

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Bibliographic Info

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

Volume (Year): 52 (1999)
Issue (Month): 2 (May)
Pages: 257-289

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Handle: RePEc:eee:jfinec:v:52:y:1999:i:2:p:257-289

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Web page: http://www.elsevier.com/locate/inca/505576

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References

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  1. G. Maxwell Ule, 1937. "Price Movements of Newly Listed Common Stocks," The Journal of Business, University of Chicago Press, vol. 10, pages 346.
  2. Demsetz, Harold, 1997. "Limit orders and the alleged Nasdaq collusion," Journal of Financial Economics, Elsevier, vol. 45(1), pages 91-95, July.
  3. Van Horne, James C, 1970. "New Listings and Their Price Behavior," Journal of Finance, American Finance Association, vol. 25(4), pages 783-94, September.
  4. Kandel, Eugene & Marx, Leslie M., 1997. "Nasdaq market structure and spread patterns," Journal of Financial Economics, Elsevier, vol. 45(1), pages 61-89, July.
  5. Sanger, Gary C. & McConnell, John J., 1986. "Stock Exchange Listings, Firm Value, and Security Market Efficiency: The Impact of NASDAQ," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 21(01), pages 1-25, March.
  6. Bessembinder, Hendrik, 1997. "The degree of price resolution and equity trading costs," Journal of Financial Economics, Elsevier, vol. 45(1), pages 9-34, July.
  7. Harris, Jeffrey H. & Schultz, Paul H., 1997. "The importance of firm quotes and rapid executions: Evidence from the January 1994 SOES rules change," Journal of Financial Economics, Elsevier, vol. 45(1), pages 135-166, July.
  8. Rasch, Sebastian, 1994. "Special stock market segments for small company shares in Europe - What went wrong?," ZEW Discussion Papers 94-13, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  9. Barber, Brad M. & Lyon, John D., 1997. "Detecting long-run abnormal stock returns: The empirical power and specification of test statistics," Journal of Financial Economics, Elsevier, vol. 43(3), pages 341-372, March.
  10. Huang, Roger D. & Stoll, Hans R., 1996. "Dealer versus auction markets: A paired comparison of execution costs on NASDAQ and the NYSE," Journal of Financial Economics, Elsevier, vol. 41(3), pages 313-357, July.
  11. Ying, Louis K. W. & Lewellen, Wilbur G. & Schlarbaum, Gary G. & Lease, Ronald C., 1977. "Stock Exchange Listings and Securities Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(03), pages 415-432, September.
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Cited by:
  1. Cécile Carpentier & Jean-François L'Her & Jean-Marc Suret, 2008. "Stock Exchange Markets for New Ventures," CIRANO Working Papers 2008s-12, CIRANO.
  2. Carpentier, Cécile & L'Her, Jean-François & Suret, Jean-Marc, 2010. "Stock exchange markets for new ventures," Journal of Business Venturing, Elsevier, vol. 25(4), pages 403-422, July.
  3. Rhee, S. Ghon & Wu, Feng, 2012. "Anything wrong with breaking a buck? An empirical evaluation of NASDAQ's $1 minimum bid price maintenance criterion," Journal of Financial Markets, Elsevier, vol. 15(2), pages 258-285.
  4. Dewenter, Kathryn L. & Field, Laura Casares, 2001. "Investment bank reputation and relaxed listing requirements: Evidence from infrastructure firm IPOs in Hong Kong," Pacific-Basin Finance Journal, Elsevier, vol. 9(2), pages 101-117, April.
  5. Wai-yan Cheng & Yan-leung Cheung & Yuen-ching Tse, 2005. "The Impact on IPO Performance of More Stringent Listing Rules with a Pre-listing Earnings Requirement: Evidence from Hong Kong," Working Papers 172005, Hong Kong Institute for Monetary Research.
  6. John Board & Alfonso Dufour & Charles Sutcliffe & Stephen Wells, 2005. "A False Perception? The relative riskiness of AIM and listed Stocks," ICMA Centre Discussion Papers in Finance icma-dp2006-01, Henley Business School, Reading University.
  7. Paul Clyde, 1999. "Is it Efficient to Impose Costs on Small-Volume Equity Traders?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 6(1), pages 81-92.
  8. Cécile Carpentier & Jean-Marc Suret, 2009. "The Survival and Success of Canadian Penny Stock IPOs," CIRANO Working Papers 2007s-28, CIRANO.
  9. Fariz Huseynov, 2010. "Review of CIS Stock Markets: Future Perspectives," Transition Studies Review, Springer, vol. 17(1), pages 63-79, May.

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