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Why do companies delist voluntarily from the stock market?

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  • Kashefi Pour, Eilnaz
  • Lasfer, Meziane

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.

Suggested Citation

  • Kashefi Pour, Eilnaz & Lasfer, Meziane, 2013. "Why do companies delist voluntarily from the stock market?," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 4850-4860.
    • Handle: RePEc:eee:jbfina:v:37:y:2013:i:12:p:4850-4860
    DOI: 10.1016/j.jbankfin.2013.08.022
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    References listed on IDEAS

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    More about this item

    Keywords

    Small firms; AIM; London Stock Exchange; Leverage; Delisting; IPO;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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