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Stock Exchange Listings, Firm Value, and Security Market Efficiency: The Impact of NASDAQ

Published online by Cambridge University Press:  06 April 2009

Gary C. Sanger  and
John J. McConnell
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Abstract

This paper is an event-time study of OTC stocks that listed on the New York Stock Exchange (NYSE) over the period 1966–1977. This period was chosen because it spans the introduction of the National Association of Securities Dealers Automatic Quotation (NASDAQ) communications system in the OTC market. In the pre-NASDAQ period, stocks, on average, earn significant positive abnormal returns in response to listing announcements. In the post-NASDAQ period, abnormal returns in response to listing announcements are statistically significantly lower than those for the pre-NASDAQ period. These results are consistent with the hypothesis that NASDAQ has reduced the benefits associated with listing on a major stock exchange. Additionally, in both the pre- and post- NASDAQ periods, stocks, on average, earn significant positive abnormal returns following the initial announcement of listing before listing actually occurs, and they earn significant negative returns immediately after listing. These anomalies are explored and the results are shown to be insensitive to variations in empirical methodology.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 21 , Issue 1 , March 1986 , pp. 1 - 25
Copyright
Copyright © School of Business Administration, University of Washington 1986

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