The Impacts of Involuntary Foreign Delistings : An Empirical Analysis

This study investigates for the first time the effects of involuntary foreign delistings from the U.S. stock exchanges. Upon announcement of delisting, prices drop a significant 4.5% permanently. The price effects do not seem to differ significantly by various measures of differential market segmentation and indirect investment barriers. We explore further explanations for the permanent price drop, including changes in risks, liquidity, and demand, and show that the price effects are consistent with the downward sloping demand curve hypothesis. Finally, the price drop is appreciably smaller than that reported by previous studies for purely domestic delistings