Asset Returns and the Listing Choice of Firms

Posted: 1 Jun 2009

See all articles by Shmuel Baruch

Shmuel Baruch

University of Utah - Department of Finance

Gideon Saar

Cornell University - Samuel Curtis Johnson Graduate School of Management

Multiple version iconThere are 3 versions of this paper

Date Written: June 2009

Abstract

We propose a mechanism that relates asset returns to the firm's optimal listing choice. We use a theoretical model to show that a stock will be more liquid when it is listed on a market where “similar” securities are traded. We empirically examine the implications of our model using New York Stock Exchange (NYSE) and Nasdaq securities. We find that the return patterns of stocks that switch markets become more similar to the return patterns of securities listed on the new market prior to the switch. Stocks that are eligible to switch but stay put are more similar to securities listed on their market than to securities listed on the other market. Our results suggest that managers make listing decisions that enhance the liquidity of their firms' stocks.

Keywords: G12, G14, G30

Suggested Citation

Baruch, Shmuel and Saar, Gideon, Asset Returns and the Listing Choice of Firms (June 2009). The Review of Financial Studies, Vol. 22, Issue 6, pp. 2239-2274, 2009, Available at SSRN: https://ssrn.com/abstract=1408424 or http://dx.doi.org/10.1093/rfs/hhl043

Shmuel Baruch (Contact Author)

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States

Gideon Saar

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

431 Sage Hall
Ithaca, NY 14853
United States
607-255-7484 (Phone)
607-255-5993 (Fax)

HOME PAGE: https://www.johnson.cornell.edu/Faculty-And-Research/Profile?id=gs25

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