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Optimal Listing Strategy: Why Microsoft and Intel Do Not List on the NYSE

Author

Listed:
  • Jim Angel
  • Reena Aggarwal

    () (Georgetown University School of Business)

Abstract

Many large firms have chosen not to list on the NYSE, despite meeting NYSE listing requirements. Dealer markets such as Nasdaq have higher quoted bid-ask spreads than auction markets like the NYSE. However, these higher spreads give broker-dealers an incentive to market a stock, expanding the pool of investors willing to hold the stock. Firms face a tradeoff between the low transaction costs of an auction market and the marketing advantages of a dealer market. New technologies allow institutional investors to bypass dealers, making it possible for large firms to have the best of both worlds: The dealer network markets the stock to retail investors while institutions have low transaction costs. The model also explains why firms can have positive price reactions when they switch from Nasdaq to AMEX and also when they move from Nasdaq to AMEX. Furthermore, the model is consistent with the curious fact that closed-end funds, unlike other firms, overwhelmingly list on exchanges, and that brokerage firms tend to list their own stocks on exchanges even while bringing other firms public on Nasdaq.

Suggested Citation

  • 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.
  • Handle: RePEc:wop:gesbwp:_007
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    Cited by:

    1. Thierry Foucault & Christine A. Parlour, 2004. "Competition for Listings," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 329-355, Summer.
    2. 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.
    3. Huddart, Steven & Hughes, John S. & Brunnermeier, Markus, 1999. "Disclosure requirements and stock exchange listing choice in an international context," Journal of Accounting and Economics, Elsevier, vol. 26(1-3), pages 237-269, January.
    4. Aggarwal, Reena & Angel, James J., 1999. "The rise and fall of the Amex Emerging Company Marketplace," Journal of Financial Economics, Elsevier, vol. 52(2), pages 257-289, May.
    5. Ryan J. Davies, 2001. "Matching and the Estimated Impact of Inter-listing (updated July 2003)," ICMA Centre Discussion Papers in Finance icma-dp2001-11, Henley Business School, Reading University, revised Jun 2003.
    6. Sofia B. Ramos, 2003. "Competition Between Stock Exchanges: A Survey," FAME Research Paper Series rp77, International Center for Financial Asset Management and Engineering.

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