The Nasdaq-Amex Merger, Nasdaq Reforms, and the Liquidity of Small Firms

26 Pages Posted: 1 Dec 2002 Last revised: 10 Aug 2009

See all articles by Travis Sapp

Travis Sapp

Iowa State University - Department of Finance

Xuemin Sterling Yan

University of Missouri - Columbia

Abstract

After the Nasdaq and AMEX merged in 1998, officials of the new entity argued that some "smaller, harder to trade" companies on Nasdaq should switch to AMEX to improve liquidity. This recommendation is based on the traditional view among academics and practitioners alike that a substantial trading cost reduction should be realized when a company switches from the multidealer Nasdaq system to the AMEX specialist system. However, in light of the 1997 Nasdaq reforms, we reexamine the validity of these arguments using data from 1996-1998 on firms that switch from the Nasdaq to AMEX or NYSE. Evidence from transaction costs, volatility, and stock returns shows declining benefits to switching over the sample period. Our findings indicate that the liquidity improvement from exchange listing is limited in the wake of the Nasdaq reforms of 1997.

JEL Classification: G10, G14

Suggested Citation

Sapp, Travis and Yan, Xuemin Sterling, The Nasdaq-Amex Merger, Nasdaq Reforms, and the Liquidity of Small Firms. Journal of Financial Research, Vol. 26, pp. 225-242, 2003., Available at SSRN: https://ssrn.com/abstract=317281

Travis Sapp (Contact Author)

Iowa State University - Department of Finance ( email )

3362 Gerdin Business Bldg.
Ames, IA 50011-1350
United States
515-294-2717 (Phone)
515-294-3525 (Fax)

Xuemin Sterling Yan

University of Missouri - Columbia ( email )

Robert J. Trulaske Sr. College of Business
427 Cornell Hall
Columbia, MO 65211-2600
United States
573-884-9708 (Phone)
573-884-6296 (Fax)

HOME PAGE: http://business.missouri.edu/yanx/

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