Why do companies transfer the trading compartment of their common stocks

• This paper contributes to the debate by exploring the reasons of Stock Exchange section switching.
• It examines a less-known type of market transfer: the section transfer within the same stock market.
• It shows that managers, through transfer, expect to reduce their costs of capital and illiquidity.
• Transfers towards a less demanding compartment are mainly motivated by listing cost reduction.
• We show that transfer decisions are based on size, liquidity, debt ratio, and growth prospects.

We analyze the motives and determinants of voluntarily stock exchange section switching on the NYSE Euronext. By strategically deciding trading-section transfer when it is beneficial, managers expect to reduce their liquidity and invisibility costs, cost of capital, or their listing costs. We show that managers decide to change the trading compartment of their common stocks based on various factors including firm's size, liquidity level, debt ratio, and expected growth opportunities. Firms that move voluntarily from a less or non regulated compartments to a more regulated one are likely to have transferred to increase their credibility, improve their stocks’ liquidity, re-balance their leverage, and to finance their growth opportunities. Whereas those that move their common stocks toward a less-regulated compartments do it mainly for costs saving reasons.