The Effect of Insider Restricted Equity on the Choice of Exchange

Download or read book The Effect of Insider Restricted Equity on the Choice of Exchange written by Kam-Ming Wan and published by . This book was released on 2001 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines why many Nasdaq-listed companies continue to remain on the Nasdaq given the benefits of listing on the NYSE, a puzzle posted by Christie and Schultz (1994). The resale volume limitation under SEC rule 144 and double counting of trading volume on Nasdaq give insiders an option to resell more of their company's equities if their company is listed on the Nasdaq instead of on the NYSE. Consequently, insiders who are more likely to take advantage of this flexibility prefer to keep their firm on the Nasdaq. My empirical results are consistent with the above claim. Firms that have a larger insider ownership and larger insider sales are more likely to remain on the Nasdaq even though they could have listed their stocks on the NYSE. Moreover, firms that have insiders sales that would have been bounded by the resale volume limitation had the companies decided to switch to the NYSE are more likely to remain on the Nasdaq. This paper has policy implications regarding financial regulations of insider trading and corporate executive compensations. In addition, it also has implications for the methodology used in comparing execution costs between NYSE-listed firms and Nasdaq-listed firms.