Abstract

http://ssrn.com/abstract=592421
 
 

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Why Do Firms Go Dark? Causes and Economic Consequences of Voluntary SEC Deregistrations


Christian Leuz


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Center for Financial Studies (CFS); University of Pennsylvania - Wharton Financial Institutions Center; CESifo Research Network

Alexander J. Triantis


University of Maryland - Robert H. Smith School of Business

Tracy Yue Wang


University of Minnesota - Twin Cities - Carlson School of Management

March 1, 2008

ECGI - Finance Working Paper No. 155/2007
AFA 2006 Boston Meetings Paper
Robert H. Smith School Research Paper No. RHS 06-045

Abstract:     
We examine a comprehensive sample of going-dark deregistrations where companies cease SEC reporting, but continue to trade publicly. We document a spike in going dark that is largely attributable to the Sarbanes-Oxley Act. Firms experience large negative abnormal returns when going dark. We find that many firms go dark due to poor future prospects, distress and increased compliance costs after SOX. But we also find evidence suggesting that controlling insiders take their firms dark to protect private control benefits and decrease outside scrutiny, particularly when governance and investor protection are weak. Finally, we show that going dark and going private are distinct economic events.

Number of Pages in PDF File: 70

Keywords: SEC deregistration, Disclosure, Going private, Regulation, Private control

JEL Classification: G18, G38, K22, G39, M41, M45, M44, G14

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Date posted: October 24, 2005 ; Last revised: February 13, 2011

Suggested Citation

Leuz, Christian and Triantis, Alexander J. and Wang, Tracy Yue, Why Do Firms Go Dark? Causes and Economic Consequences of Voluntary SEC Deregistrations (March 1, 2008). ECGI - Finance Working Paper No. 155/2007; AFA 2006 Boston Meetings Paper; Robert H. Smith School Research Paper No. RHS 06-045. Available at SSRN: http://ssrn.com/abstract=592421 or http://dx.doi.org/10.2139/ssrn.592421

Contact Information

Christian Leuz (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-1996 (Phone)
HOME PAGE: http://chicagobooth.edu/fac/christian.leuz
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
HOME PAGE: http://www.nber.org
European Corporate Governance Institute (ECGI)
Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Center for Financial Studies (CFS) ( email )
Grüneburgplatz 1
Frankfurt am Main, 60323
Germany
University of Pennsylvania - Wharton Financial Institutions Center
3641 Locust Walk
Philadelphia, PA 19104-6218
United States
CESifo Research Network
Poschinger Str. 5
Munich, DE-81679
Germany
Alexander J. Triantis
University of Maryland - Robert H. Smith School of Business ( email )
Department of Finance
College Park, MD 20742-1815
United States
301-405-2246 (Phone)
301-314-9157 (Fax)
Tracy Yue Wang
University of Minnesota - Twin Cities - Carlson School of Management ( email )
19th Avenue South
Minneapolis, MN 55455
United States
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