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Determinants of Firm Delisting on the Prague Stock Exchange

Author

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  • Zuzana Fungáčová
  • Jan Hanousek

Abstract

This research investigates the emergence of stock market in the Czech Republic. We use Czech mass privatization as an experiment that allows us to analyze under what conditions a viable stock market arises. On the Prague Stock Exchange (PSE), unlike its counterparts in Poland or Hungary, exceptionally large amounts of shares were delisted e.g. excluded from public trading soon after trading at this market began in 1993. We estimate the determinants of shares delisting analyzing the period 1993-2004. Using firm-level data on listed and delisted companies we show that it was possible to prevent massive delisting if certain pre-privatization and privatization characteristics of the companies had been taken into account when deciding which companies to place on the stock exchange for public trading following the mass privatization. This result has important implications for establishing stock markets in emerging economies.

Suggested Citation

  • Zuzana Fungáčová & Jan Hanousek, 2011. "Determinants of Firm Delisting on the Prague Stock Exchange," Prague Economic Papers, University of Economics, Prague, vol. 2011(4), pages 348-365.
  • Handle: RePEc:prg:jnlpep:v:2011:y:2011:i:4:id:404:p:348-365
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    References listed on IDEAS

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    1. Joshua D. Angrist & Alan B. Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 69-85, Fall.
    2. Andrianova, Svetlana & Demetriades, Panicos & Xu, Chenggang, 2011. "Political Economy Origins of Financial Markets in Europe and Asia," World Development, Elsevier, vol. 39(5), pages 686-699, May.
    3. Atanasov, Vladimir & Black, Bernard & Ciccotello, Conrad & Gyoshev, Stanley, 2010. "How does law affect finance? An examination of equity tunneling in Bulgaria," Journal of Financial Economics, Elsevier, vol. 96(1), pages 155-173, April.
    4. Marie-Renée Bakker & Alexandra Gross, 2004. "Development of Non-bank Financial Institutions and Capital Markets in European Union Accession Countries," World Bank Publications, The World Bank, number 15030, April.
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    More about this item

    Keywords

    privatization; transition economy; stock market; delisting;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • P34 - Economic Systems - - Socialist Institutions and Their Transitions - - - Finance

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