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

Posted: 9 Sep 1996

See all articles by Reena Aggarwal

Reena Aggarwal

Georgetown University - Robert Emmett McDonough School of Business

James Angel

Georgetown University - Department of Finance

Date Written: Undated

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 trade off 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.

JEL Classification: G10, G30, G18

Suggested Citation

Aggarwal, Reena and Angel, James J., Optimal Listing Strategy: Why Microsoft and Intel Do Not List on the NYSE (Undated). Available at SSRN: https://ssrn.com/abstract=7712

Reena Aggarwal (Contact Author)

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-3784 (Phone)
202-687-0798 (Fax)

HOME PAGE: http://explore.georgetown.edu/people/aggarwal/

James J. Angel

Georgetown University - Department of Finance ( email )

McDonough School of Business
Washington, DC 20057
United States
202-687-3765 (Phone)
202-687-4031 (Fax)

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