An Empirical Analysis of Common Stock Delistings

This paper presents an empirical analysis of firms that are delisted from a major stock exchange. The delisting process is described and stock price movements surrounding delisting are analyzed. For firms with prior announcements, equity values decline by approximately 8.5 percent on announcement da...

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Bibliographic Details
Published in:Journal of financial and quantitative analysis 1990-06, Vol.25 (2), p.261-272
Main Authors: Sanger, Gary C., Peterson, James D.
Format: Article
Language:English
Subjects:
Analysis
Business structures
Common stock
Demand curves
Empirical
Empirical evidence
Financial securities
Hypotheses
Impacts
Investment trusts
Liquidity
Listing
Nasdaq Composite Index
Negative
Quantitative analysis
Return on equity
Securities markets
Standard and Poors 500 Index
Stock exchange speculation
Stock exchanges
Stock market delistings
Stock prices
Studies
Citations: Items that cite this one
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Summary:This paper presents an empirical analysis of firms that are delisted from a major stock exchange. The delisting process is described and stock price movements surrounding delisting are analyzed. For firms with prior announcements, equity values decline by approximately 8.5 percent on announcement day. For firms without prior announcements, a similar adjustment takes place between the last day of trading in the initial market and the close of the first day of trading in the new market. Four hypotheses concerning the decline in firm value are examined. These are the liquidity hypothesis, the management signalling hypothesis, the exchange certification hypothesis, and the downward sloping demand curve hypothesis. Evidence consistent with the liquidity hypothesis is presented in the paper. Unlike evidence on stock exchange listings, returns in the post-delisting period do not appear to be anomalous.
ISSN:0022-1090
1756-6916
DOI:10.2307/2330828