Investor base, cost of capital, and new listings on the NYSE

In this article, we report the results of our recent study of 273 companies that during the 1980s decided to switch the trading locale of their shares from the over-the-counter (OTC) or NASDAQ market to the NYSE. We found that share prices increased by about 6%, on average, at the time the stocks became listed on the NYSE, and that the investor base of these firms increased by almost 20%. We also found that the average stock experienced a reduction in bid/ask spread of about 5% after listing. In an analysis of the relation among share prices, investor base, and bid/ask spread, we found that the stock price increase was significantly correlated with both the percentage increase in investor base and the reduction in bid/ask spread.