Competition for Listings
AbstractWe develop a model in which two profit maximizing exchanges compete for IPO listings. They choose the listing fees paid by firms wishing to go public and control the trading costs incurred by investors. All firms prefer lower costs, however firms differ in how they value a decrease in trading costs. Hence, in equilibrium, the exchanges obtain positive expected profits by charging different trading fees and different listing fees. As a result, firms that list on different exchanges have different characteristics. The model has testable implications for the cross-sectional characteristics of IPOs' on different quality exchanges and the relationship between the level of trading costs and listing fees. We also find that competition does not guarantee that exchanges choose welfare maximizing trading rules. In some cases, welfare is larger with a monopolist exchange than with oligopolist exchanges.
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Bibliographic InfoPaper provided by HEC Paris in its series Les Cahiers de Recherche with number 666.
Length: 42 pages
Date of creation: 02 Apr 1999
Date of revision:
market microstructure; listings; competition; exchanges; regulation;
Other versions of this item:
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
- E19 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Other
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
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