The Timing of Voluntary Delisting

Abstract

For many firms, voluntarily delisting from a stock exchange can be optimal. We model an en- trepreneur’s incentives to voluntarily delist the firm as a trade-off between consumption of private benefits when listed and expected improvements in the firm’s performance after delisting. Our model allows for heterogeneity across firms and countries, and various micro and macro shocks affect the delisting decision. Such a model makes novel predictions regarding the delisting patterns around the world. We empirically confirm these predictions using manually collected delisting data from 26 countries. Increasing policy and regulatory uncertainties can partially explain the greater popularity of voluntary delistings.

Keywords: Voluntary Delisting; Political Uncertainty; Regulatory Uncertainty; Competing Risk

JEL Classification: G32, G34, G38, G81