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The Real Effects of Delisting: Evidence from a Regression Discontinuity DesignTor-Erik BakkeUniversity of Oklahoma - Division of Finance Candace JensUniversity of Rochester - Simon Graduate School of Business, Toni M. WhitedUniversity of Rochester - Simon Graduate School of Business December 22, 2010 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.
Number of Pages in PDF File: 20 Keywords: delisting, investment, regression discontinuity design JEL Classification: G31 working papers seriesDate posted: December 24, 2010 ; Last revised: July 5, 2012Suggested Citation |
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