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The timing of voluntary delisting

Part of the AFL Virtual Research Seminar Series

  • 21 Oct 2020, 11.00am to 21 Oct 2020, 12.15pm BST (GMT +01:00)
  • This is an online event.
  • This event is free

Dr Izidin El Kalak, Cardiff University, will discuss their paper:

Abstract: In recent years the attractiveness of being a public firm has been declining and we see fewer and fewer IPOs and more and more firms who are voluntarily delisting from the major exchanges. We develop a theoretical model describing the optimal time to voluntarily delist from a major stock exchange. Three key parameters determine a firm’s optimal time to delist. Its growth rate and business risk (volatility of revenues) combined with the total costs associated with staying public are the main drivers of a firm’s stochastic probability to delist. To empirically verify our theory’s predictions, we implement hazard rate models and confirm that the aforementioned key variables are significant drivers of a firm’s voluntary delisting choice. Further tests are conducted showing how macroeconomic shocks, such as rising economic policy uncertainty (EPU) and increased regulatory burden, are two major channels through which firm’s growth rate and business risk get shocked causing changes in the probability of delisting. Finally, we classify our sample firms into firms that took an optimal decision to (de)list versus those that took a sub-optimal decision to (de)list, and show that stock market participants reacted differently to these delisting announcements (with Alcino Azevedo, Gonul Colak, and Radu Tunaru).

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