Does switching from NASDAQ to the NYSE affect investment–cash flow sensitivity?

We examine whether a firm's sensitivity of investments to cash flow changes when it switches from the NASDAQ to the NYSE over the period 1992–2002. Contrary views exist on the effect of listing switches on investment sensitivity to cash flow. Investment–cash flow sensitivity is a proxy for the degree of uncertainty of using internal funds to finance a firm's investments. We use a least square dummy variable model to analyze panel data before and after switching to determine the impact of switching. Based on pooled data, our evidence is consistent with the view that NASDAQ-to-NYSE switchers have significantly lower investment–cash flow sensitivity, which means that firms rely less heavily on internal financing after switching and find accessing external financing easier. Thus, firms may benefit from switching in terms of a lower cost of external capital due to such factors as increasing visibility, liquidity, and reputation.