The Impact of Exchange Listing on Corporate Governance: Evidence from Direct Listings*

Direct listing offers a new, but unproven method of going public for industrial firms. We use prior direct listings by public non-listed REITs (PNLRs) as laboratory to explore the impact of exchange membership on the corporate governance resulting from these transactions. To that end, we examine companies with publicly owned, but non-listed shares in a unique setting where the impacts of listing are distinct from the confounding effect of capital raising inherent in a traditional IPO. Our evidence suggests that younger, more profitable PNLRs with better governance and professional management are more likely to directly list. Moreover, we find that internal corporate governance improves beyond the exchange’s requirements upon listing. The data indicates institutional ownership increases following the listing and we confirm these changes are not due capital raising.