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

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

Research output: Contribution to journalArticlepeer-review

9 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)183-193
Number of pages11
JournalFinance Research Letters
Volume9
Issue number4
DOIs
StatePublished - Dec 2012
Externally publishedYes

Keywords

  • Delisting
  • Employment
  • Investment
  • Regression discontinuitiy design

ASJC Scopus subject areas

  • Finance

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