Competition for Listings

Thierry Foucault and Christine A. PARLOUR
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Christine A. PARLOUR: GSIA, Carnegie Mellon University, Postal: Pittsburgh, PA 15213

No 666, Les Cahiers de Recherche from HEC Paris

Abstract: We develop a model in which two profit maximizing exchanges compete for IPO listings. They choose the listing fees paid by firms wishing to go public and control the trading costs incurred by investors. All firms prefer lower costs, however firms differ in how they value a decrease in trading costs. Hence, in equilibrium, the exchanges obtain positive expected profits by charging different trading fees and different listing fees. As a result, firms that list on different exchanges have different characteristics. The model has testable implications for the cross-sectional characteristics of IPOs' on different quality exchanges and the relationship between the level of trading costs and listing fees. We also find that competition does not guarantee that exchanges choose welfare maximizing trading rules. In some cases, welfare is larger with a monopolist exchange than with oligopolist exchanges.

Keywords: market microstructure; listings; competition; exchanges; regulation (search for similar items in EconPapers)
JEL-codes: D51 E19 F12 (search for similar items in EconPapers)
Date: 1999-04-02
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Related works:
Working Paper: Competition for Listings (1999)
Working Paper: Competition for Listings
Journal Article: Competition for Listings (2004)
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Persistent link: http://EconPapers.repec.org/RePEc:ebg:heccah:0666

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