The Real Effects of Delisting: Evidence from a Regression Discontinuity Design
University of Oklahoma - Division of Finance
Tulane University - A.B. Freeman School of Business
Toni M. Whited
University of Rochester - Simon Business School; National Bureau of Economic Research
December 22, 2010
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.
Number of Pages in PDF File: 20
Keywords: delisting, investment, regression discontinuity design
JEL Classification: G31
Date posted: December 24, 2010 ; Last revised: July 5, 2012
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