The Timing of Voluntary Delisting
48 Pages Posted: 13 Jan 2020
Date Written: December 23, 2019
We develop a theoretical real options model that advises firms on the timing of voluntary delisting. We apply this model to 2,358 U.S. listed firms (1980-2016) and classify them as listed (delisted) firms that should be listed (delisted), good decision (GD), and listed (delisted) firms which should be delisted (listed), bad decision (BD). We perform a survival analysis using a discrete-time duration-dependent hazard model, so as to investigate the effect of the firm’s characteristics on the likelihood of delisting, and examine the mean differences between the GD and BD samples. Most of the mean differences are statistically significant, which attests the economic rationale underlying our model. We highlight that the turnover, turnover growth and turnover volatility are largely neglected by the delisting literature, and conclude that these variables are however key determinants of voluntary delisting.
Keywords: Delist Timing; Real Options; Survival Analysis; Voluntary Delisting
JEL Classification: G12, G32, G34
Suggested Citation: Suggested Citation