The Effect of Market Segmentation and Illiquidity on Asset Prices: Evidence from Exchange Listings

Gregory B Kadlec and John J McConnell

Journal of Finance, 1994, vol. 49, issue 2, 611-36

Abstract: This article documents the effect on share value of listing on the New York Stock Exchange and reports the results of a joint test of Robert C. Merton's (1987) investor recognition factor and Yakov Amihud and Haim Mendelson's (1986) liquidity factor as explanations of the change in share value. The authors find that, during the 1980s, stocks earned abnormal returns of 5 percent in response to the listing announcement and that listing is associated with an increase in the number of shareholders and a reduction in bid-ask spreads. Cross-sectional regressions provide support for both investor recognition and liquidity as sources of value from exchange listing. Copyright 1994 by American Finance Association.

Date: 1994
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