Why do listed firms pay for market making in their own stock?

A recent innovation in equity markets is the introduction of market maker ser-vices paid for by the listed companies themselves. We investigate why firms arewilling to pay a cost to improve the secondary market liquidity of their shares. Weshow that a contributing factor in this decision is the likelihood that the rm willinteract with the capital markets in the near future, either because they have capi-tal needs, or that they are planning to repurchase shares. We also nd a signicantreduction in liquidity risk and cost of capital for firms that hire a market maker...