Article1986

MARKET REACTION TO NYSE LISTINGS: TESTS OF THE MARKETABILITY GAINS HYPOTHESIS

70 citations0/0 files storedThe Journal of Financial Research

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Financial Markets and Investment Strategies Corporate Finance and Governance Financial Analysis and Corporate Governance

Abstract

Abstract This study examines the market reaction to listing on the New York Stock Exchange (NYSE). The marketability gains hypothesis states that investors expect liquidity gains for the less liquid over‐the‐counter (OTC) stocks but not for their liquid counterparts after their listing on the NYSE. The hypothesis is supported even after accounting for other firm‐specific news releases. Stocks with low liquidity on the OTC exhibit a positive reaction, whereas stocks with high liquidity show a non‐positive market reaction around the announcement of the listing application. The findings imply that the two different marketplaces, NYSE and OTC, are suitable for stocks with different liquidity characteristics.

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