Off But Not Gone: A Study of Nasdaq Delistings
55 Pages Posted: 8 Dec 2004 Last revised: 13 Apr 2008
Date Written: March 4, 2008
We examine 1,098 Nasdaq firms delisted in 1999-2002 that subsequently traded in the OTC Bulletin Board and/or the Pink Sheets. Market quality deteriorates significantly after delisting: share volume declines by two-thirds; quoted spreads almost triple from 12.1 to 33.9 percent; and effective spreads triple from 3.3 to 9.9 percent. Volatility triples from 4.4 to 14.3 percent, but quickly reverts to slightly elevated levels. Deterioration is significantly larger for more severe violations (e.g. bankruptcy) than for lesser infractions (e.g. minimum bid price). We find the OTC Bulletin Board provides a "soft landing" for delisted firms relative to the Pink Sheets. Although the delisting process takes at least 90 days, the drop in market quality is concentrated on the delisting date, highlighting the benefits of Nasdaq listing and the economic rationale for tiered listing fees. We argue that the increased costs resulting from enforcing Nasdaq's minor (non-core) listing criteria outweigh the benefits.
Keywords: delisting, market quality, Nasdaq
JEL Classification: G12, G14, G33
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Down and Out in the Stock Market: The Law and Finance of the Delisting Process
By Jonathan R. Macey, Maureen O'hara, ...
The Initial Listing Decisions of Firms that Go Public
By Shane A. Corwin and Jeffrey H. Harris
The Stock Market as a Screening Device and the Decision to Go Public
By Tore Ellingsen and Kristian Rydqvist
Spam Works: Evidence from Stock Touts and Corresponding Market Activity
Market Microstructure of the Pink Sheets
From Pink Slips to Pink Sheets: Market Quality Around Delisting from NASDAQ
Busted Ipos and Windows of Misopportunity
By Craig M. Lewis, James K. Seward, ...
Taming the Animal Spirits of the Stock Markets: A Behavioral Approach to Securities Regulation
Expected Underpricing, Corporate Control and the Choice of Issuance Mechanism in Unseasoned Equity Markets