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The Nasdaq‐Amex Merger, Nasdaq Reforms, and the Liquidity of Small Firms

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  • Travis R. A. Sapp
  • Xuemin (Sterling) Yan

Abstract

After the Nasdaq and American Stock Exchange (AMEX) merged in 1998, officials of the new entity argued that some “smaller, harder to trade” companies on Nasdaq should switch to AMEX to improve liquidity. This recommendation is based on the traditional view among academics and practitioners alike that a substantial trading cost reduction should be realized when a company switches from the multidealer Nasdaq system to the AMEX specialist system. However, in light of the 1997 Nasdaq reforms, we reexamine the validity of these arguments using data from 1996–98 on firms that switch from the Nasdaq to the AMEX or the New York Stock Exchange. Evidence from transaction costs, volatility, and stock returns shows declining benefits to switching during the sample period. Our findings indicate that the liquidity improvement from exchange listing is limited in the wake of the Nasdaq reforms of 1997.

Suggested Citation

  • Travis R. A. Sapp & Xuemin (Sterling) Yan, 2003. "The Nasdaq‐Amex Merger, Nasdaq Reforms, and the Liquidity of Small Firms," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 26(2), pages 225-242, June.
    • Handle: RePEc:bla:jfnres:v:26:y:2003:i:2:p:225-242
    DOI: 10.1111/1475-6803.00056
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    References listed on IDEAS

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    1. Jim Angel & Reena Aggarwal, "undated". "Optimal Listing Strategy: Why Microsoft and Intel Do Not List on the NYSE," Working Papers _007, Georgetown School of Business.
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    Cited by:

    1. Bennett, Paul & Wei, Li, 2006. "Market structure, fragmentation, and market quality," Journal of Financial Markets, Elsevier, vol. 9(1), pages 49-78, February.
    2. Wańczyk Krzysztof, 2018. "Impact of Changes in Composition of Exchange Price Index Shares of Listed Polish Companies," Financial Sciences. Nauki o Finansach, Sciendo, vol. 23(3), pages 111-121, September.

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