The real effects of delisting: Evidence from a regression discontinuity design

Tor-Erik Bakke, Candace E. Jens and Toni Whited

Finance Research Letters, 2012, vol. 9, issue 4, 183-193

Abstract: We study how the delisting of a firm’s stock, and the accompanying drop in liquidity, causally affects a firm’s real economic decisions. Although delisting is endogenous, we identify a causal effect by using regression discontinuity design (RDD). This technique suits the delisting problem because the probability of delisting rises discontinuously when observable variables pass known thresholds. We find that delisting results in a modest decline in investment and cash saving and an important and robust decline in employment.

Keywords: Regression discontinuitiy design; Delisting; Investment; Employment (search for similar items in EconPapers)
JEL-codes: C26 G31 G32 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:9:y:2012:i:4:p:183-193

DOI: 10.1016/j.frl.2012.08.002

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