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Competition for Listings

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  • Thierry Foucault

    ()
    (HEC School of Management and CEPR)

  • Christine A. Parlour

    ()
    (Carnegie Mellon University)

Abstract

We develop a model in which stock exchanges compete for IPO listings. They choose the listing fees paid by entrepreneurs wishing to go public and control the trading costs incurred by investors. All entrepreneurs prefer lower trading costs but differ in how much they value a decrease in trading costs. Hence, in equilibrium, competing exchanges can obtain positive expected profits by choosing different trading costs and different listing fees. The model has testable implications on the cross-sectional characteristics of IPOs on different-quality exchanges and the relationship between the level of trading costs and listing fees.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 35 (2004)
Issue (Month): 2 (Summer)
Pages: 329-355

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Handle: RePEc:rje:randje:v:35:y:2004:2:p:329-355

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References

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  1. Patrick Bolton & Ernst-Ludwig von Thadden, 1998. "Blocks, Liquidity, and Corporate Control," Journal of Finance, American Finance Association, American Finance Association, vol. 53(1), pages 1-25, 02.
  2. Ananth N. Madhavan, . "Trading Mechanisms in Securities Markets," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 16-90, Wharton School Rodney L. White Center for Financial Research.
  3. Ellingsen, Tore & Rydqvist, Kristian, 1997. "The Stock Market as a Screening Device and the Decision to Go Public," Working Paper Series in Economics and Finance, Stockholm School of Economics 174, Stockholm School of Economics.
  4. Shane A. Corwin & Jeffrey H. Harris, 2001. "The Initial Listing Decisions of Firms that Go Public," Financial Management, Financial Management Association, Financial Management Association, vol. 30(1), Spring.
  5. 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, Elsevier, vol. 41(3), pages 313-357, July.
  6. Jim Angel & Reena Aggarwal, . "Optimal Listing Strategy: Why Microsoft and Intel Do Not List on the NYSE," Working Papers, Georgetown School of Business _007, Georgetown School of Business.
  7. Brennan, M. J. & Franks, J., 1997. "Underpricing, ownership and control in initial public offerings of equity securities in the UK," Journal of Financial Economics, Elsevier, Elsevier, vol. 45(3), pages 391-413, September.
  8. Kandel, Shmuel & Sarig, Oded & Wohl, Avi, 1999. "The Demand for Stocks: An Analysis of IPO Auctions," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 12(2), pages 227-47.
  9. 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, Financial Management Association, vol. 21(4), Winter.
  10. Chordia, Tarun & Subrahmanyam, Avanidhar, 1995. "Market Making, the Tick Size, and Payment-for-Order Flow: Theory and Evidence," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 68(4), pages 543-75, October.
  11. John S. Hughes & Steven Huddart & Markus K Brunnermeier, 1998. "Disclosure Requirements and Stock Exchange Listing Choice in an International Context," FMG Discussion Papers, Financial Markets Group dp282, Financial Markets Group.
  12. Hasbrouck, Joel, 1995. " One Security, Many Markets: Determining the Contributions to Price Discovery," Journal of Finance, American Finance Association, American Finance Association, vol. 50(4), pages 1175-99, September.
  13. Harris, L., 1990. "Liquidity , Trading Rules and Electronic Trading Systems ," Papers, Southern California - School of Business Administration 91-8, Southern California - School of Business Administration.
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Cited by:
  1. Emiliano Pagnotta & Thomas Philippon, 2011. "Competing on Speed," NBER Working Papers 17652, National Bureau of Economic Research, Inc.
  2. Joyce Hsieh & Chien-Chung Nieh, 2010. "An overview of Asian equity markets," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, Asia Pacific School of Economics and Government, The Australian National University, vol. 24(2), pages 19-51, November.
  3. Jérémy Ducros & Angelo Riva, 2014. "The Lyon Stock Exchange: A Struggle for Survival (1866-1914)," PSE Working Papers, HAL halshs-00960528, HAL.
  4. Igal Hendel & Aviv Nevo & François Ortalo-Magné, 2009. "The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadison.com," American Economic Review, American Economic Association, American Economic Association, vol. 99(5), pages 1878-98, December.
  5. Thierry Foucault, 2006. "Liquidité, coût du capital et organisation de la négociation des valeurs boursières," Revue d'Économie Financière, Programme National Persée, Programme National Persée, vol. 82(1), pages 123-138.
  6. Degryse, H.A. & Achter, M. van & Wuyts, G., 2012. "Internalization, Clearing and Settlement, and Liquidity," Discussion Paper, Tilburg University, Center for Economic Research 2012-002, Tilburg University, Center for Economic Research.
  7. Felix Treptow & Stefan Wagner, 2005. "Stock Exchanges and Issuers: A Changing Relationship," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, DIW Berlin, German Institute for Economic Research, vol. 74(4), pages 125-139.
  8. Cecilia Caglio & Stewart Mayhew, 2012. "Equity trading and the allocation of market data revenue," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2012-65, Board of Governors of the Federal Reserve System (U.S.).
  9. Steen Thomsen & Frederik Vinten, 2014. "Delistings and the costs of governance: a study of European stock exchanges 1996–2004," Journal of Management and Governance, Springer, Springer, vol. 18(3), pages 793-833, August.
  10. Juranek, Steffen & Walz, Uwe, 2010. "Vertical integration, competition, and financial exchanges: Is there grain in the silo?," CFS Working Paper Series, Center for Financial Studies (CFS) 2010/22, Center for Financial Studies (CFS).
  11. Thierry Foucault, 2006. "Liquidity, cost of capital and the organization of trading in stock markets," Revue d'Économie Financière, Programme National Persée, Programme National Persée, vol. 82(1), pages 113-123.

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