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This study examines the market reaction to listing on the New York Stock Exchange (NYSE). The marketability gains hypothesis states that investors expect liquidity gains for the less liquid over‐the‐counter (OTC) stocks but not for their liquid counterparts after their listing on the NYSE. The hypothesis is supported even after accounting for other firm‐specific news releases. Stocks with low liquidity on the OTC exhibit a positive reaction, whereas stocks with high liquidity show a non‐positive market reaction around the announcement of the listing application. The findings imply that the two different marketplaces, NYSE and OTC, are suitable for stocks with different liquidity characteristics.
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Theoharry Grammatikos (1986) studied this question.
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