The Decision to Delist from the Stock Market

Theory and Empirical Evidence of Going Private

Barbara Fidanza, Ottorino Morresi, Alberto Pezzi

• Publisher: Palgrave Macmillan
• Year: 2018
• ISBN:
  9783319950495
• Topic: Business
• Subtopic: Financial Services
• Index: Business

In an organized and organic way, this book covers all the possible theoretical and empirical facets of delisting, adding to the well-developed literature on IPOs. IPO and delisting are strictly related; the reasons for delisting may be found in the loss of the incentives that drove the firm to the public market in the past. However, the book presents unique motivations not directly related to the IPO decision. This book covers what the existing literature has not in focusing on specific aspects such as market liquidity and microstructure, listing costs, market for corporate control, corporate governance issues and so on. Of interest to academics and students, this contribution puts all pieces in order and finds a thread that can link each theory to the others.

© The Author(s) 2018

Barbara Fidanza, Ottorino Morresi and Alberto PezziThe Decision to Delist from the Stock Markethttps://doi.org/10.1007/978-3-319-95049-5_1

Begin Abstract

1. Facts, Figures and Theory

Ottorino Morresi¹

(1)

Department of Economics, Roma Tre University, Rome, Italy

Ottorino Morresi

Keywords

Asymmetric informationInvestor recognitionAccess to capitalStock liquidityCorporate governanceListing requirementsShort-termismTakeover defense

End Abstract

1.1 Introduction

The theoretical literature on the decision to go public is extensive and includes a large number of contributions that try to model how, when, and why a firm may decide to list its shares on a stock exchange. However, it has always been difficult to perform empirical studies that directly test for factors explaining why companies go public. This difficulty is typically related to data constraints. Significant efforts to overcome this issue were made, among others, by Rydqvist and Högholm (1995), Pagano et al. (1998), Brau and Fawcett (2006), Bancel and Mittoo (2009), Kim and Weisbach (2008) and Aslan and Kumar (2011) who have tried to empirically investigate the reasons for going public. The reverse process, that is, the process to remove a firm and its publicly traded shares from a market has not been empirically investigated much either even though this decision has become increasingly popular. Also in the case of delisting, the reasons why this choice has been poorly empirically investigated are mainly linked to data unavailability.

Table 1.1 clearly shows that since the 1990s the practice of delisting has spread over the major stock exchanges around the world, involving a significant and increasing number of firms. More interestingly, after 2000, the number of delisted firms often outnumbers the number of newly listed ones in the stock exchanges located in developed economies. Second, as can be expected, new listings tend to overcome delistings during periods of booming stock markets (2004–2007) while the opposite occurs during falling stock markets (2001–2003 and 2008–2009). This behavior reflects the well-documented relevance of market timing factors based on the ability of managers to take advantage of favorable market conditions and the investor sentiment.¹ Third, stock exchanges in newly industrialized Asian economies appear to be less affected by this propensity toward delisting. In fact, the number of newly listed firms almost always exceeds the number of delisted ones regardless of the period investigated. However, this result is largely due to a marked increase in newly listed firms rather than a decrease in delisted firms. The number of delisted firms goes up over time in the same way as for stock exchanges in major advanced economies.

Table 1.1

Newly listed and delisted firms around the world (1996–2017)

		1996	1997	1998	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
North America
American Stock Exchange (AMEX)	Newly listed	97	104	100	90	112	44	43	76	89	97	70	92	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
	Delisted	137	80	NA	100	113	87	78	87	74	79	96	118	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
Mexico	Newly listed	11	22	3	3	2	4	6	78	110	12	31	63	43	42	27	63	NA	NA	3	8	4	5
	Delisted	9	14	6	8	15	9	9	10	9	6	22	32	37	9	2	17	18	2	2	2	3	1
Nasdaq	Newly listed	655	648	487	614	605	144	121	56	170	139	156	290	177	131	195	151	NA	NA	176	565	71	89
	Delisted	121	717	906	873	700	815	535	410	NA	NA	NA	348	289	302	269	249	261	180	182	197	244	NA
NYSE	Newly listed	278	273	205	151	122	144	151	107	152	146	118	126	71	99	163	144	NA	NA	179	111	76	131
	Delisted	100	171	194	254	286	215	145	111	107	135	138	232	155	212	154	141	114	151	99	148	181	NA
Toronto	Newly listed	168	193	116	144	113	84	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
	Delisted	103	96	103	121	151	181	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
TMX Group	Newly listed	NA	NA	NA	NA	NA	NA	194	204	346	388	383	408	359	207	333	369	NA	NA	67	116	30	96
	Delisted	NA	NA	NA	NA	NA	NA	367	345	291	215	212	249	296	383	278	230	175	262	202	199	213	204
South America
Lima	Newly listed	37	35	17	27	18	12	10	7	12	8	4	14	23	5	14	11	NA	NA	8	9	10	10
	Delisted	38	25	16	37	30	12	7	10	15	8	7	11	5	9	6	5	3	10	13	9	9	11
Sao Paulo (B3—Brasil Bolsa Balcão)	Newly listed	26	19	57	15	24	10	13	10	19	13	32	70	11	13	52	15	NA	NA	2	0	0	10
	Delisted	19	28	67	63	44	36	42	31	22	18	25	16	23	20	24	25	25	12	12	15	12	55
Europe
Amsterdam	Newly listed	9	16	23	23	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
	Delisted	12	12	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
Barcelona	Newly listed	8	35	75	129	101	115	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
	Delisted	14	16	20	21	18	9	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
BME Spanish Exchanges	Newly listed	NA	NA	NA	NA	NA	NA	514	275	NA	NA	NA	192	143	38	53	88	NA	NA	258	185	47	33
	Delisted	NA	NA	NA	NA	NA	NA	33	67	NA	NA	NA	NA	NA	NA	NA	145	116	80	49	39	192	402
Brussels	Newly listed	6	19	24	23	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
	Delisted	13	23	21	25	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
Copenhagen	Newly listed	8	5	11	6	8	5	0	2	3	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
	Delisted	11	6	8	18	15	23	16	9	12	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
Deutsche Börse	Newly listed	403	765	67	168	152	21	6	0	6	15	35	65	189	29	108	216	NA	NA	16	25	19	16
	Delisted	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	40	44	61	45	32	51	37	68	70	45	29
Euronext	Newly listed	NA	NA	NA	NA	106	49	18	24	32	34	52	92	36	14	52	45	NA	NA	35	58	28	26
	Delisted	NA	NA	NA	NA	80	140	99	82	67	65	54	100	66	46	55	60	64	48	47	44	45	50
Helsinki	Newly listed	3	12	12	28	20	9	3	1	1	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
	Delisted	9	1	7	8	12	12	9	5	9	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
Milan Stock Exchange (Borsa Italiana)	Newly listed	15	13	22	36	49	18	14	11	10	19	45	33	9	8	2	3	2	7	6	10	7	10
	Delisted	21	22...

Table of contents

• Cover
• Front Matter
• 1. Facts, Figures and Theory
• 2. Leveraged Buyouts, Going Dark and the Change of the Trading Venue
• 3. The Decision to Delist: International Empirical Evidence
• 4. Voluntary Delisting and Agency Costs: The Case of the London Stock Exchange
• Back Matter