Hostname: page-component-7dd5485656-wjfd9 Total loading time: 0 Render date: 2025-10-31T03:29:54.216Z Has data issue: false hasContentIssue false
  • English
  • Français

An Empirical Analysis of Common Stock Delistings

Published online by Cambridge University Press:  06 April 2009

Gary C. Sanger  and
James D. Peterson
Get access Rights & Permissions [Opens in a new window]

Abstract

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.

Information

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 25 , Issue 2 , June 1990 , pp. 261 - 272
Copyright
Copyright © School of Business Administration, University of Washington 1990

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

Amihud, Y., and Mendelson, H.. “Asset Pricing and the Bid-Ask Spread.” Journal of Financial Economics, 17 (12 1986), 223–249.CrossRefGoogle Scholar
Amihud, Y., and Mendelson, H.. “Liquidity and Asset Prices: Financial Management Implications.” Financial Management, 17 (Spring 1988), 5–15.CrossRefGoogle Scholar
Badrinath, S. G.; Gay, G. D.; and Kale, J. R.. “Patterns of Institutional Investment, Prudence, and the Managerial ‘Safety-Net’ Hypothesis.” Journal of Risk and Insurance, 56 (12 1989), 605–629.CrossRefGoogle Scholar
Bradley, J.Distribution-Free Statistical Tests. Englewood Cliffs, NJ: Prentice Hall (1968).Google Scholar
Brown, S. J., and Warner, J. B.. “Using Daily Stock Returns: The Case of Event Studies.” Journal of Financial Economics, 14 (03 1985), 3–31.CrossRefGoogle Scholar
Company Guide. New York: American Stock Exchange (1987).Google Scholar
Cummins, J. D.; Percival, J. R.; Westerfield, R.; and Ramage, J. G.. “Effects of ERISA on the Investment Policies of Private Pension Plans: Survey Evidence.” Journal of Risk and Insurance, 47 (09 1980), 447–476.CrossRefGoogle Scholar
Edelman, R. B., and Baker, H. K.. “The Effects of Delisting on the Price Behavior of Common Stocks.” Working Paper, American Univ. (10 1987).Google Scholar
Grammatikos, T., and Papaioannou, G.. “Market Reaction to NYSE Listing: Tests of the Marketability Gains Hypothesis.” Journal of Financial Research, 9 (Fall 1986a), 215–227.CrossRefGoogle Scholar
Grammatikos, T., and Papaioannou, G.. “The Informational Value of Listing on the New York Stock Exchange.” The Financial Review, 21 (11 1986b), 485–499.CrossRefGoogle Scholar
Howe, J. S., and Schlarbaum, G. G.. “SEC Trading Suspensions: Empirical Evidence.” Journal of Financial and Quantitative Analysis, 21 (09 1986), 323–333.CrossRefGoogle Scholar
Jarrell, G. A. “The Stock Price Effects of NYSE Delisting for Violating Corporate Governance Rules.” Working Paper, U.S. Securities and Exchange Commission (12 1984).Google Scholar
Kryzanowski, L. “The Efficiency of Trading Suspensions: A Regulatory Action Designed to Prevent the Exploitation of Monopoly Information.” Journal of Finance, 34 (12 1979), 1187–1200.CrossRefGoogle Scholar
McConnell, J. J., and Sanger, G. C.. “The Puzzle in Post-Listing Common Stock Returns.” Journal of Finance, 42 (03 1987), 119–140.Google Scholar
Listing Procedure. New York, NY: New York Stock Exchange (1976).Google Scholar
Merjos, A. “Stricken Securities.” Barron's, 44 (03 4, 1963), 9.Google Scholar
O'Donnell, J. L. “Case Evidence of the Value of a New Stock Exchange Listing.” Michigan State University Business Topics, 17 (08 1969), 15–21.Google Scholar
Ratner, D.Institutional Investors. Mineola, NY: Foundation Press (1978).Google Scholar
Sanger, G. C, and McConnell, J. J.. “Stock Exchange Listing, Firm Value, and Security Market Efficiency: The Impact of NASDAQ.” Journal of Financial and Quantitative Analysis, 2 1 (03 1986), 1–25.Google Scholar
Daily Stock Price Record: New York Stock Exchange. New York, NY: Standard and Poor's Corporation (1962–1985).Google Scholar
Daily Stock Price Record: American Stock Exchange. New York, NY: Standard and Poor's Corporation (1962–1985).Google Scholar
Daily Stock Price Record: Over the Counter. New York, NY: Standard and Poor's Corporation (1971–1985).Google Scholar
Scholes, M., and Williams, J.. “Estimating Betas from Nonsynchronous Data.” Journal of Financial Economics, 5 (12 1977), 309–327.CrossRefGoogle Scholar
Schleifer, A. “Do Demand Curves for Stocks Slope Down?” Journal of Finance, 41 (07 1986), 579–590.CrossRefGoogle Scholar
Ying, L. K. W.; Lewellen, W. G.; Schlarbaum, G. G.; and Lease, R. C.. “Stock Exchange Listings and Securities Returns.” Journal of Financial and Quantitative Analysis, 12 (09 1977), 415–432.CrossRefGoogle Scholar