The effect of listing switches from a growth market to a main board: An alternative perspective

We examine whether firms switching listings from the Korean growth market (KOSDAQ) to the main board (KOSPI) experienced improved trading-related market quality. We focus on market macrostructure and use a difference-in-difference technique with nearest matching. Contrary to previous research and practitioners' opinions, we find that trading-related market quality mostly deteriorated or remained unchanged following the switch, indicating that the specific market macrostructure of a country matters. Listing switches produce a negative externality by weakening KOSDAQ and thereby impairing funding for innovative new firms, suggesting that policymakers should encourage firms whose characteristics fit the standalone growth market to remain listed there.