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Why Do Firms Go Dark? Causes and Economic Consequences of Voluntary SEC DeregistrationsChristian LeuzUniversity 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. TriantisUniversity of Maryland - Robert H. Smith School of Business Tracy Yue WangUniversity 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 working papers seriesDate posted: October 24, 2005 ; Last revised: February 13, 2011Suggested CitationContact Information
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