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The Real Effects of Delisting: Evidence from a Regression Discontinuity Design

20 Pages Posted: 24 Dec 2010 Last revised: 5 Jul 2012

Tor-Erik Bakke

University of Oklahoma - Division of Finance

Candace Jens

Tulane University - A.B. Freeman School of Business

Toni M. Whited

University of Michigan, Stephen M. Ross School of Business; National Bureau of Economic Research

Date Written: 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.

Keywords: delisting, investment, regression discontinuity design

JEL Classification: G31

Suggested Citation

Bakke, Tor-Erik and Jens, Candace and Whited, Toni M., The Real Effects of Delisting: Evidence from a Regression Discontinuity Design (December 22, 2010). Available at SSRN: https://ssrn.com/abstract=1729947 or http://dx.doi.org/10.2139/ssrn.1729947

Tor-Erik Bakke

University of Oklahoma - Division of Finance ( email )

Norman, OK 73019
United States

Candace Jens

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

Toni M. Whited (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

National Bureau of Economic Research ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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