Gary C. Sanger

Stock Exchange Listings, Firm Value, and Security Market Efficiency: The Impact of NASDAQ

This paper is an event-time study of OTC stocks that listed on the New York Stock Ex? change (NYSE) over the period 1966-1977. This period was chosen because it spans the introduction of the National Association of Securities Dealers Automatic Quotation (NASDAQ) communications system in the OTC market. In the pre-NASDAQ period, stocks, on average, earn significant positive abnormal returns in response to listing an? nouncements. In the post-NASDAQ period, abnormal returns in response to listing an? nouncements are statistically significantly lower than those for the pre-NASDAQ period. These results are consistent with the hypothesis that NASDAQ has reduced the benefits associated with listing on a major stock exchange. Additionally, in both the pre- and post- NASDAQ periods, stocks, on average, earn significant positive abnormal returns follow? ing the initial announcement of listing before listing actually occurs, and they earn signifi? cant negative returns immediately after listing. These anomalies are explored and the re? sults are shown to be insensitive to variations in empirical methodology.

An Empirical Analysis of Common Stock Delistings

This paper presents an empirical analysis of firms that are delisted from a major stock exchange. The delisting process is described and stock price movements surrounding delisting are analyzed. For firms with prior announcements, equity values decline by approximately 8.5 percent on announcement day. For firms without prior announcements, a similar adjustment takes place between the last day of trading in the initial market and the close of the first day of trading in the new market. Four hypotheses concerning the decline in firm value are examined. These are the liquidity hypothesis, the management signalling hypothesis, the exchange certification hypothesis, and the downward sloping demand curve hypothesis. Evidence consistent with the liquidity hypothesis is presented in the paper. Unlike evidence on stock exchange listings, returns in the post-delisting period do not appear to be anomalous.

Index Price Discovery in the Cash Market

This paper employs Hasbrouck’s (2003) information share method to analyze the flow of information in equity markets. In particular we compare trading in Index ETFs with that of their underlying securities. Surprisingly, ETFs seem to play a significant role in the price discovery process, rather than serving as passive indexing/hedging vehicles. Using TAQ data we reconstruct the second-by-second intraday price series for the S&P 500 using its component stocks. Results show that the ETF contributes almost half to the price formation of the spot S&P 500. Next, comparing trades and quotes, we determine the relative amount of informed trading (versus noise) in the ETF. When trading in the ETFs is driven more by private information, the ETF contributes more to price discovery. Thus, the evidence suggests that a significant portion of ETF trading is information motivated.

Managerial bonding and stock liquidity: An analysis of dual-class firms

Given the decision to create a second class of stock through a dual-class structure, we propose that management is more (less) likely to create a liquid secondary market for both classes of shares the lower (higher) its willingness to tie its personal wealth to firm performance. If market makers recognize this relation, they should assign a higher likelihood to trades motivated by superior information in shares of firms that list both classes of stock and a lower likelihood for firms that list only one class of stock pursuant to recapitalization. Additionally, they should assign a lower likelihood to trades motivated by superior information in shares of IPOs that choose a dual-class structure and list only one class relative to IPOs that remain single-class. Our empirical tests based on IPOS and recaps between 1985 and 1988 provide support for these propositions.