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For many decades, there were numerous stock exchanges operating in cities all across Germany. We collected all IPOs on all German Stock exchanges in the period 1896- 2016 and analyze the listing decisions of these companies. We find that the provincial exchanges had traditionally been complementary to the main stock exchange, solving information asymmetries especially for smaller and local firms.
After World War II, regional stock exchanges gradually lost market share in the primary market. We provide conclusive evidence that the division of Germany and the shift of the main Market to Frankfurt heavily influenced this development. After the division, Germany was much smaller because of the territorial losses. Already in 1935, the National Socialist had reduced the number of regional stock exchanges from 23 to 9. Thus, after 1949 the new main stock exchange Frankfurt was much more central to most firms, while the distance to the next regional stock exchanges was significantly larger. These changes reduced the information advantage of regional exchanges significantly to the benefit of Frankfurt.