Down and Out in the Stock Market: The Law and Economics of the Delisting Process

Jonathan Macey, Maureen O'Hara and David Pompilio

Journal of Law & Economics, 2008, vol. 51, issue 4, pages 683-713

Abstract: Since 1995, more than 9,000 firms have delisted from U.S. stock markets, with almost half of these being involuntary. This paper examines the law and economics of the delisting process. We examine economic rationales for delisting, the legal rules that define it, and the causes of delisting. Using a sample of New York Stock Exchange firms delisted in 2002, we examine the effects of their delisting and subsequent trading on the Pink Sheets. We find huge costs to delisting, with percentage spreads tripling and volatility doubling but with volume being remarkably high. We also show that actual delisting times vary considerably, with some firms trading for months after failing the listing requirements. With exchanges transitioning to profit-seeking status, we argue that the current delisting process also needs to change, and we suggest properties of an optimal delisting rule and approaches to achieve it. (c) 2008 by The University of Chicago. All rights reserved..

Date: 2008

Downloads: (external link)
http://www.journals.uchicago.edu/doi/pdf/10.1086/593386 link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ucp:jlawec:v:51:y:2008:i:4:p:683-713

Ordering information: This journal article can be ordered from
http://www.journals.uchicago.edu/JLE/order1.html

Access Statistics for this article

Journal of Law & Economics is edited by Dennis W. Carlton, Austan Goolsbee, Randall S. Krosner, Douglas Lichtman and Edward A. Snyder

More articles in Journal of Law & Economics from University of Chicago Press
Address: The University of Chicago Press, Journals Division, P.O. Box 37005 Chicago, IL 60637
Series data maintained by Christopher F. Baum ().