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Defining the Relationship Between Firm’s Performance and Delisting: Empirical Evidence of Going Private in Europe

One of the reasons why a firm chooses to go private is the significant amount of cash flows which can exacerbate agency costs: this can indicate poor growth opportunities and make external resources less required. In line with both knowledge economy and financial literature, the paper aims to indaga...

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Autores principales: Magni, Domitilla, Morresi, Ottorino, Pezzi, Alberto, Graziano, Domenico
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Springer US 2021
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8208886/
http://dx.doi.org/10.1007/s13132-021-00806-w
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author Magni, Domitilla
Morresi, Ottorino
Pezzi, Alberto
Graziano, Domenico
author_facet Magni, Domitilla
Morresi, Ottorino
Pezzi, Alberto
Graziano, Domenico
author_sort Magni, Domitilla
collection PubMed
description One of the reasons why a firm chooses to go private is the significant amount of cash flows which can exacerbate agency costs: this can indicate poor growth opportunities and make external resources less required. In line with both knowledge economy and financial literature, the paper aims to indagate the relationship between agency costs, firm’s performance, and delisting. Despite there is evidence in finance that highlights the role of exchange regulators in the going private processes, just few studies focus on the voluntary delisting and its antecedents. Starting from the knowledge economy setting, this paper aims to define how firm’s financial performance moderates the relationship between agency costs and delisting choices. Based on a sample of non-financial firms delisted from the most important European stock markets between 1997 and 2017, we applied an OLS regression to analyze the main variables that influence the going private processes. We find that a high level of stock market performance, associated with high level of free cash flows, promotes going private as a means of anticipating and preventing future value decreases. Finally, the paper provides practical implications for the development of new approach of delisting choice.
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spelling pubmed-82088862021-06-17 Defining the Relationship Between Firm’s Performance and Delisting: Empirical Evidence of Going Private in Europe Magni, Domitilla Morresi, Ottorino Pezzi, Alberto Graziano, Domenico J Knowl Econ Article One of the reasons why a firm chooses to go private is the significant amount of cash flows which can exacerbate agency costs: this can indicate poor growth opportunities and make external resources less required. In line with both knowledge economy and financial literature, the paper aims to indagate the relationship between agency costs, firm’s performance, and delisting. Despite there is evidence in finance that highlights the role of exchange regulators in the going private processes, just few studies focus on the voluntary delisting and its antecedents. Starting from the knowledge economy setting, this paper aims to define how firm’s financial performance moderates the relationship between agency costs and delisting choices. Based on a sample of non-financial firms delisted from the most important European stock markets between 1997 and 2017, we applied an OLS regression to analyze the main variables that influence the going private processes. We find that a high level of stock market performance, associated with high level of free cash flows, promotes going private as a means of anticipating and preventing future value decreases. Finally, the paper provides practical implications for the development of new approach of delisting choice. Springer US 2021-06-17 2022 /pmc/articles/PMC8208886/ http://dx.doi.org/10.1007/s13132-021-00806-w Text en © The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2021 This article is made available via the PMC Open Access Subset for unrestricted research re-use and secondary analysis in any form or by any means with acknowledgement of the original source. These permissions are granted for the duration of the World Health Organization (WHO) declaration of COVID-19 as a global pandemic.
spellingShingle Article
Magni, Domitilla
Morresi, Ottorino
Pezzi, Alberto
Graziano, Domenico
Defining the Relationship Between Firm’s Performance and Delisting: Empirical Evidence of Going Private in Europe
title Defining the Relationship Between Firm’s Performance and Delisting: Empirical Evidence of Going Private in Europe
title_full Defining the Relationship Between Firm’s Performance and Delisting: Empirical Evidence of Going Private in Europe
title_fullStr Defining the Relationship Between Firm’s Performance and Delisting: Empirical Evidence of Going Private in Europe
title_full_unstemmed Defining the Relationship Between Firm’s Performance and Delisting: Empirical Evidence of Going Private in Europe
title_short Defining the Relationship Between Firm’s Performance and Delisting: Empirical Evidence of Going Private in Europe
title_sort defining the relationship between firm’s performance and delisting: empirical evidence of going private in europe
topic Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8208886/
http://dx.doi.org/10.1007/s13132-021-00806-w
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