STOCK EXCHANGE LISTINGS, FIRM VALUE AND MARKET EFFICIENCY
Abstract
This thesis presents both a theoretical and empirical analysis of stock exchange listings. Such a study has implications regarding the efficiency of capital markets, the operational structure of securities' markets and corporate financial policy. The literature has suggested several benefits which may stem from major stock exchange listings. Of these, only two appear to be consistent with rational economic principals. A stock exchange listing may enhance the value of a firm either if the act of listing signals positive information about the firm to the capital market, or if organized trading provides a more liquid market for the firm's stock. Past empirical studies have indicated that firms' stocks do indeed experience abnormally high returns around the time of major exchange listings. Of equal interest is the fact that these results appear to be anomalous with respect to semi-strong market efficiency. The current study examines the return behavior of two samples of firms which obtained NYSE listings over the periods of 1966 through 1967 and 1974 through 1977. Several methodological improvements over previous studies are made. For the early sample period, the results are consistent with previous studies. Listing firms achieve positive abnormal performance over this period and profitable trading strategies appear to be possible based upon publicly available information. The results are shown to be robust to variations in methodological details. Alternatively, for the later sample period, firms do not experience positive abnormal return behavior. This result is consistent with the hypothesis that NASDAQ reduced or eliminated an earlier advantage which the NYSE possessed in providing liquidity. The results also provide evidence against the information signaling hypothesis. In both sample periods, significant negative abnormal returns accrue to firms immediately following listing. Abnormal trading profits also appear to be attainable from this source in the late sample period. From a policy standpoint, it would appear that the value of a major exchange listing has diminished since the inception of NASDAQ.
Degree
Ph.D.
Subject Area
Business community
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