Competition for listings

摘要

We develop a model in which stock exchanges compete for IPO listings. They choose the listing fees paid by entrepreneurs wishing to go public and control the trading costs incurred by investors. All entrepreneurs prefer lower trading costs but differ in how much they value a decrease in trading costs. Hence, in equilibrium, competing exchanges can obtain positive expected profits by choosing different trading costs and different listing fees. The model has testable implications on the cross-sectional characteristics of IPOs on different-quality exchanges and the relationship between the level of trading costs and listing fees.