The Relationship between Listing Requirements and Market Quality: An Examination Using NASDAQ’s Tiered Market Structure

Abstract

This study examines the relationship between listing requirements and market quality. Related studies analyzed market quality by focusing on disclosure requirements, while neglecting potential effects from listing requirements. Most of these studies failed to control for different market structures, thereby creating joint hypothesis problems. Using the unique structure of NASDAQ, We examine market quality while controlling for disclosure requirements and market structure. We find a significant relationship exists between listing requirements and four measures of market quality. The results indicate that listing requirements represent the types of information revealed, whereas disclosure requirements represent the mechanism through which markets reveal information.