Why do companies delist voluntarily from the stock market?

Eilnaz Kashefi Pour and Meziane Lasfer

Journal of Banking & Finance, 2013, vol. 37, issue 12, 4850-4860

Abstract: We analyse the motives and market valuation of voluntarily delisting from the London Stock Exchange. We show that firms that delist voluntarily are likely to have come to the market to rebalance their leverage rather than to finance their growth opportunities. During their quotation life, their leverage and insider ownership remained very high, they did not raise equity capital, and their profitability, growth opportunities, and trading volume declined substantially. They also generate negative pre-event and announcement date excess returns. These results hold even after controlling for agency, asymmetric information, and liquidity effects, and suggest that firms delist voluntarily when they fail to benefit from listing. Overall, these firms destroyed shareholder value and they should not have come to the market.

Keywords: Small firms; AIM; London Stock Exchange; Leverage; Delisting; IPO (search for similar items in EconPapers)
JEL-codes: G14 G32 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:12:p:4850-4860

DOI: 10.1016/j.jbankfin.2013.08.022

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