The Long-Run Negative Drift of Post-Listing Stock Returns




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    • Both authors are from the Jesse H. Jones Graduate School of Administration, Rice University. This paper has benefited from the comments of Rashad Abdel-khalik, Amir Barnea, David Dubofsky, Gene Finn, Steve Kane, Josef Lakonishok, Scott Lee, Arvind Mahajan, Tim Opler, Richard Shockley, Meir Statman, Kay Stice, the editor René Stulz, Harry Tutwiler, and an anonymous referee. We particularly appreciate the comments of Tim Loughran and Jay Ritter and thank them for sharing their data on initial and seasoned equity offerings with us. This paper has been presented at the November 1994 Seminar on the Analysis of Security Prices at the University of Chicago, the 1994 Texas Finance Symposium, Rice University, Texas A&M University, the University of Houston, and the University of Texas at Austin. We appreciate the research assistance of Vijayshankar Balaji and Haiming Xu.


After firms move trading in their stock to the American or New York Stock Exchanges, stock returns are generally poor. Although many listing firms issue equity around the time of listing, post-listing performance is not entirely explained by the equity issuance puzzle. Similar to the conclusions regarding other long-run phenomena, poor post-listing performance appears related to managers timing their application for listing. Managers of smaller firms, where initial listing requirements may be more binding, tend to apply for listing before a decline in performance. Poor post-listing performance is not observed in larger firms.