Why Do Public Companies Go Private? The Case of the Johannesburg Stock Exchange

Abstract

This paper investigates the decline in the number of listed companies on the Johannesburg Stock Exchange by focusing on voluntary decisions to “go private.” It contributes to the important and ongoing debate in the economics and corporate finance literature on the relationship between the ownership structure of a firm and its performance. The research outcomes show clearly that voluntary delistings from the JSE could not be pinned onto one possible cause. We concluded that the lack of financial visibility and transaction costs are by far the most impactful causes of delistings from the JSE between 2012 and 2021. It is also clear from the research that the companies most affected by the causes for delistings on the JSE have a small to medium market capitalisation, which is estimated to be below R10 billion. We conclude that the problem rests with the structure of the market within which certain firms that are listed on the JSE operate. We further conclude that the JSE is no longer an exchange for companies that have a small to medium market capitalisation.

Keywords: Listings, delistings, drivers for delistings, public companies go private, private equity, incentives for listing, JSE, South African exchanges, capital markets, emerging markets, stock exchanges and IPOs