Reasons for Delisting and Consequences: A Literature Review and Research Agenda
40 Pages Posted: 11 Apr 2015
Date Written: April 7, 2015
This paper provides a literature review of the delisting phenomenon in the US, the UK and Continental Europe. Delisting is defined as the removal of a listed company from a stock exchange, but the phenomenon is characterized by a great heterogeneity. The observed heterogeneity in delistings leads us to address a fundamental question: why would a firm be delisted from the stock exchange during its lifetime? Analysis of the reasons for delisting in a cost-saving perspective leads us to define two different levels of delisting. In the case of a voluntary delisting, firms are facing an increase in listing costs and decide to opt out of the stock exchange in order to avoid these costs. In the case of an involuntary delisting, firms are no longer able to manage their costs and forced to delist. Involuntary delisting can thus be viewed as a different level from voluntary delisting. These differences suggest that it is relevant to consider the economic consequences type of delisting, and this paper also addresses this issue. Lastly, we identify some gaps in the delisting literature and other ambiguities and contrasting results, and we suggest a research agenda for more in-depth study of delisting heterogeneity.
Keywords: Delisting, Going private, IPO survival, Corporate governance, Cost-benefit analysis
JEL Classification: G34
Suggested Citation: Suggested Citation