Which firms benefit from market making

From 1998 until 2008, all firms on the JASDAQ exchange could choose and switch between a market-maker method similar to NASDAQ and a continuous auction method similar to NYSE for trading their shares. We find that selecting a more suitable trading method increases firm value. When low-liquidity firms switched to market making, their liquidity improved, while high-liquidity firms switched to auction despite modest but significant decreases in liquidity. The results suggest that though market making is costly, it is valuable for firms as long as the liquidity benefits are sufficient to justify the implicit intermediation fee.