When Do Listed Firms Pay for Market Making in Their Own Stock?. Issue 2 (21st December 2014)

• Record Type: Journal Article
• Authors: Skjeltorp, Johannes Atle; Ødegaard, Bernt Arne
• Is Part Of: Financial management. Volume 44:Issue 2(2015:Summer)
• Page Start: 241
• Page End: 266
• Publication Date: 2014-12-21
• Subjects: Corporations -- Finance -- Periodicals; 658.1505
• DOI: 10.1111/fima.12058
• Languages: English
• ISSNs: 0046-3892

Abstract

<abstract abstract-type="main"> <title> <x xml:space="preserve">Abstract</x> </title> <p>A recent innovation in the equity markets is the introduction of market maker services procured by the listed companies themselves. Using data from the Oslo Stock Exchange, we investigate what motivates issuing firms to pay to improve the secondary market liquidity of their listed shares. By examining the timing of market maker hirings relative to corporate events, we show that hirings are more likely when the firm will interact with the capital markets in the near future. Futhermore, a typical firm employing a designated market maker is more likely to raise capital, repurchase shares, or experience an exit by insiders.</p> </abstract>