The cost of equity and exchange listing evidence from the French stock market

Michel Dubois and Cem Ertur
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Michel Dubois: UNINE - Université de Neuchâtel = University of Neuchatel

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Abstract: We reconsider the behaviour of prices around the period close to the listing on the Marché à Règlement Mensuel (RM). First, an event study based on a sample of 60 firms has been set up to test the existence of the exchange listing effect on the French market. Then we discuss and test the financial reasons which can justify abnormal returns around the announcement day and the day of the listing. We explore four reasons to explain the impact of the stock exchange listings: one is the informative content of the operation which induces an upward revision of the future earnings. Three other hypotheses rely on a decrease in the discount rate originated by less risky cash flows, an increase in trading activity and/or, an increase in the relative size of the firm's investor base. We establish a relation between the abnormal returns and the changes in the parameters of the market model after listing on the RM. Cross-sectional regressions provide support for this model but the fact that the RM is a forward market also matters. Trading activity seems to play an indirect role in explaining the abnormal returns. However, the model does not explain the price behaviour at the announcement of listing.

Keywords: abnormal returns; banking; taxation; event study; finance (search for similar items in EconPapers)
Date: 1997
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Published in [Research Report] Laboratoire d'analyse et de techniques économiques(LATEC). 1997, 28 p., ref. bib. : 2 p

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Working Paper: The Cost of Equity and Exchange Listing. Evidence from the French Stock Market (1997)
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