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

Author

Listed:
  • 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.

Suggested Citation

  • Bakke, Tor-Erik & Jens, Candace E. & Whited, Toni M., 2012. "The real effects of delisting: Evidence from a regression discontinuity design," Finance Research Letters, Elsevier, vol. 9(4), pages 183-193.
  • Handle: RePEc:eee:finlet:v:9:y:2012:i:4:p:183-193
    DOI: 10.1016/j.frl.2012.08.002
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Cole, Rebel & Cumming, Douglas & Li, Dan, 2016. "Do banks or VCs spur small firm growth?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 41(C), pages 60-72.
    2. repec:eee:pacfin:v:43:y:2017:i:c:p:15-36 is not listed on IDEAS
    3. Marco Becht & Andrea Polo & Stefano Rossi, 2016. "Does Mandatory Shareholder Voting Prevent Bad Acquisitions?," Review of Financial Studies, Society for Financial Studies, vol. 29(11), pages 3035-3067.
    4. repec:eee:jfinec:v:124:y:2017:i:2:p:223-243 is not listed on IDEAS
    5. Masanori Orihara, "undated". "Stock market listing and corporate policy: Evidence from reforms to Japanese corporate law," Discussion papers ron283, Policy Research Institute, Ministry of Finance Japan.

    More about this item

    Keywords

    Regression discontinuitiy design; Delisting; Investment; Employment;

    JEL classification:

    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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