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OTC to Big Board: drawbacks

Listing your company's stock on the Big Board is like the old saw about buying an IBM computer: Nobody gets fired for doing it. But you could be sacrificing liquidity (the ability to market a stock quickly without sacrificing much in price), say Texas A&M Profs. David A. Dubofsky and John C. Groth in the winter issue of The Journal of Financial Research of Georgetown University.

They looked at 344 switches between 1975 and '81. The findings: There was ''A sharp and apparently permanent decline in liquidity'' for securities switching from over-the-counter market to the New York Stock Exchange; companies switching from the American Stock Exchange to the NYSE ''realize an increase in liquidity after the switch date, followed by a gradual decline'' to slightly above pre-switch levels; liquidity after switching from OTC to AMEX ''declined by 24.6 percent.'' Greater liquidity is often a factor cited for moving one's stock listing from the over-the-counter market to the New York Stock Exchange or the American Exchange.

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But competing dealers in OTC securities, the professors say, ''may provide more continuous liquid markets than the organized exchanges that employ monopolist specialists.

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