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Competition for Listings

Author

Listed:
  • 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.

Suggested Citation

  • Thierry Foucault & Christine A. Parlour, 2004. "Competition for Listings," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 329-355, Summer.
    • Handle: RePEc:rje:randje:v:35:y:2004:2:p:329-355
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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