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The real effects of delisting: Evidence from a regression discontinuity design

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  • Bakke, Tor-Erik
  • Jens, Candace E.
  • Whited, Toni M.

Abstract

We study how the delisting of a firm’s stock, and the accompanying drop in liquidity, causally affects a firm’s real economic decisions. Although delisting is endogenous, we identify a causal effect by using regression discontinuity design (RDD). This technique suits the delisting problem because the probability of delisting rises discontinuously when observable variables pass known thresholds. We find that delisting results in a modest decline in investment and cash saving and an important and robust decline in employment.

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Bibliographic Info

Article provided by Elsevier in its journal Finance Research Letters.

Volume (Year): 9 (2012)
Issue (Month): 4 ()
Pages: 183-193

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Handle: RePEc:eee:finlet:v:9:y:2012:i:4:p:183-193

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Web page: http://www.elsevier.com/locate/frl

Related research

Keywords: Regression discontinuitiy design; Delisting; Investment; Employment;

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References

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