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Disappearing act: insight for the management accountant on recently delisted U.S. companies.

As a company grows and evolves, management accountants are integral to guiding it through financial and nonfinancial challenges alike. They play a key part in transforming the creative dreams of entrepreneurs into solid business strategies, preparing solicitations of outside capital, and perhaps coordinating the offering of stock on a public exchange. (1)

Many of the same skills are needed to guide a less-than-successful company through the painful and difficult process to unwind from or merge with another company in a bid to revitalize business. While liquidation is final and bankruptcy is likely devastating to investors, firms also can modify their capital structures through mergers with other firms or go through leveraged or manager-led buyouts of outside investors. The role of the management accountant during the "end of public life" process is potentially as important as it is during the firm's initial growth phase.

Not much has been written about the delisting process, which happens when a firm removes itself from trading on a public stock exchange. Beyond a statement that provides basic details about a firm delisting from an exchange, very little information is made available or tracked about delisted firms. Management accountants who work for a firm that might be facing this prospect would benefit knowing more about the process itself, the types of firms that have gone through it, and what happens after the delisting. Others who might find this information useful include accounting practitioners, accounting students, and anyone interested in increasing his or her general understanding of the delisting process and the impact the delisting process has on firms.

Going Dark

Domestic firms that "voluntary delist" must issue a press release announcing their intention, file Form 8-K, "Current Reports," with the U.S. Securities & Exchange Commission (SEC) within the designated time frame (currently 10 days prior to filing Form 25), and then file SEC Form 25, "Notification of Removal From Listing and/or Registration." The delisting becomes effective 10 days after the filing of Form 25, and most SEC reporting obligations cease at that time. (2)

If a firm fails to meet the listing requirements of its respective stock exchange, the stock exchange will effectively "involuntary delist" the firm by filing Form 25-NSE, thereby delisting the firm without its official consent. To officially cease all SEC reporting obligations, a firm will need to certify that there are fewer than 300 shareholders of record by filing Form 15, "Certification and Notification of Termination Registration," else a reduced number of filings may still be required under Sections 12(g) and 15(d) of the Securities Exchange Act of 1934. (Delisting and deregistration are two separate actions, each with its own unique filing requirements. (3)) Financial professionals should work with the legal department or with outside counsel and with external auditors to ensure that the firm stays in compliance by filing all required forms on a timely basis.

The financial press, investors, and other related parties typically consider a company as "going dark" after it files Form 15. These firms subsequently receive less oversight and monitoring by Wall Street analysts, who focus primarily on companies while they are publicly traded on a stock exchange or prior to their initial public offering (IPO).

The reasons why companies might delist from a major stock exchange are controversial, as is whether delisting sends a positive, neutral, or negative signal to markets and investors. More recently, the resultant success or failure of firms acquired by a private equity purchaser, which has gained increased attention in the financial press, has come to symbolize how one of the processes to allocate capital within our equity markets is changing for better or worse.

The increased number of companies that have delisted in recent years is cited as evidence that the rising costs of regulatory compliance are driving companies to foreign stock exchanges in an effort to escape intrusive and expensive disclosure and other legal requirements after passage of the Sarbanes-Oxley Act of 2002 (SOX). (4) The Congressional Research Service released a study in January 2007 addressing criticism that recent U.S. regulations, primarily SOX-related, have created incentives for firms to list IPOs on foreign markets or to delist from U.S. stock exchanges. (5) In late 2007, the head of the U.S. Chamber of Commerce said the United States is "shooting [itself] in the foot by imposing a growing array of legal, tax, and regulatory impediments on [its capital] markets." (6) Four years later, the Chairman and CEO of the Coca-Cola Company made global headlines by announcing that China is more business friendly than the U.S. These views motivate an exploration into the multiple reasons why a company may choose to voluntarily delist its stock from an exchange or be forced to delist involuntarily if it fails to meet listing requirements.

Prior Studies

Academic studies addressing an array of delisting topics extend from pre-SOX periods to more recent years. (7) Kenneth Lehn and Annette Poulsen reported in a 1989 Journal of Finance article that "going private" in a leveraged recapitalization improves managerial decision making regarding free cash flow. (8) In 2007, a study conducted by Daniel Cohen, Aiyesha Dey, and Thomas Lys suggested that increased criminal and civil penalties associated with corporate misconduct may lead managers and directors to demand higher wages to compensate for the higher risks they face, affecting the costs of being under the SEC's rule. (9) A 2003 survey by PricewaterhouseCoopers cited costs associated with the need for additional internal resources to address such issues as increased legal requirements, staff training, and new technology as negative aspects of SEC reporting, specifically SOX-related. (10) And in 2005, Brian Bushee and Christian Leuz suggested in a Journal of Accounting and Economics article that firms potentially choose to "go private" to avoid disclosure regulation. (11)

A decade after the initial structure of SOX took shape, the debate continues over the Act's merits and costs of compliance. (12) Additional discussion concerning the effects of SOX legislation is not likely to fade any time in the near future. Overall, the majority of regulatory accounting disclosure literature has concentrated on SOX issues, mandatory disclosures, and various financial reporting environment issues. (13) But there is still more to learn.

Other research has suggested that some firms will benefit from the decision to delist and become privately held. Firms that experience agency conflicts between owners and managers related to free cash flows can reduce these agency costs by recapitalizing as a privately held firm. This research stream cites limited corporate governance as a factor contributing to the transition from a publicly traded company to a privately held one.

In summary, the strategic implications that surround the delisting process include:

* Improving managerial decision making regarding free cash flow,

* Potentially reduced wages demanded because of fewer risks from lower scrutiny by the SEC,

* Avoiding disclosure regulation, and

* Reduced agency costs in firms with corporate governance mechanisms.

Incentives and Consequences of Delisting

The number of U.S. firms that have delisted from major U.S. stock exchanges has grown significantly. During the time frame of this study, the New York Stock Exchange (NYSE) and the NASDAQ Stock Market (NASDAQ) reported the highest number of delistings in nearly a decade. In some cases, a firm transfers to a different stock exchange for strategic reasons--perhaps because of differences in listing requirements or for increased visibility associated with listing on a more "prominent" stock exchange. Yet whether a firm delists voluntarily or involuntarily, some consequences may generally apply.

Positive aspects of delisting include:

* Significant cost savings due to the reduction or elimination of SEC regulatory costs and exchange-listing fees;

* Potential reduction of audit and legal expenses;

* Repositioning within the investment market;

* Reduction in risk exposure;

* Decreased costs associated with maintaining a positive public image with multiple constituencies at all times (e.g., stock analysts, investors, financial press, etc.);

* Increased private control, benefitting managers and owners; and

* Possible decreased conflicts between inside owners and outside investors.

The negative aspects of delisting also are extensive and have been well documented by extant literature. (14) Research indicates that delisted firms are associated with:

* Significantly lower revenues, cash flows, and share prices;

* Reduced investor confidence in a firm's economic prospects;

* Diminished appearance of fair and reliable financial reporting, translating into increased investment risk;

* Fewer institutional investors and analysts following the stock;

* Increased borrowing costs combined with additional difficulty raising capital; and

* Significant market quality deterioration after the delisting. Specifically, share volume declines by two-thirds, quoted spreads and effective spreads almost triple, and volatility more than triples. (15) Also, in many cases, the shares that stockholders are left holding are significantly less liquid. (16)

A Study of Delisted Firms

With so many high-profile industries and examples of financial distress in the news, the issues related to delisting are pertinent to many key constituencies. We set out to conduct a study that addresses a series of questions not analyzed previously that are pertinent to any accountant's general understanding of the consequences of delisting from a stock exchange.

Our study analyzes information collected from delisting notifications from the U.S. equity markets filed with the SEC during calendar years 2008 and 2009. The selected period includes a high number of delistings as a result of a severe economic downturn, affording the opportunity to evaluate a larger sample of delisting companies. The final sample was limited to delistings reported for the three dominant U.S. stock exchanges during the survey period: NYSE, the American Stock Exchange (AMEX), and NASDAQ.

All three stock exchanges experienced major ownership changes and market repositioning in recent years. The NYSE has been owned by NYSE Euronext since 2007. In January 2009, the parent company of NYSE purchased AMEX. Two name changes later, AMEX has been blended with additional stock exchanges purchased by its parent company. AMEX initially remained intact during our study period, and listed firms identified themselves with the AMEX name in a majority of instances. Therefore, for purposes of this study, we identify AMEX as a separate major U.S. stock exchange. Finally, NASDAQ has been owned by the parent company NASDAQ OMX since 2001. In 2007, the parent also assumed ownership of the Philadelphia stock exchange.

Listing requirements for the three major stock exchanges in the U.S. are similar though not identical. Three common requirements are (1) maintaining a minimum stock price, (2) holding revenues above a minimum point (specified allowances are typically made for short periods of time), and (3) timely filing of all required SEC reports. We limit our analysis to the delisting of a firm's common stock rather than of a secondary security. (17)

Six Important Questions and Answers

We identified six important questions to help understand delisting. We selected these questions to give readers a profile of the companies affected by the delisting process, reasons why companies delist, and information as to whether these firms continued to have their shares traded on a public exchange.

1. How many companies delisted from the three exchanges, and which industries were affected the most and the least?

There were 1,036 SEC delisting notifications filed during the 2008 calendar year and 831 filed during 2009 (SEC Form 25 for voluntary delisting and Form 25-NSE for involuntary delisting). To place this period into perspective, a total of 1,307 delisting forms were filed in 2007, while a total of 747 and 666 forms were filed for 2010 and 2011, respectively. For our sample, we included only firms with filings due to common stock delisting, excluding firms with other reasons, such as warrant expirations, as well as firms with missing data. The result is a final sample of 467 delisted firms in 2008 and 2009.

Table 1 shows a breakdown of firms by Standard Industrial Classification (SIC) code, including the percentages that delisted voluntarily, involuntarily, and those that remained listed. The highest number of firms that delisted voluntarily were in the manufacturing industries that included metal industries, transportation equipment, and electrical and computer equipment, while firms that delisted involuntarily were more frequently associated with manufacturing industries such as tobacco, textiles, wood, chemical, and petroleum products. The industry with the fewest delisted firms during the period studied is the financial services, insurance, and real estate industry.

Overall, manufacturing industries comprise about 30% of firms in the Compustat universe that did not delist, while almost 45% of firms that delisted are in these industries. Employment in manufacturing industries generally pays higher wages than in the service sector, and therefore a loss of manufacturing jobs is a concern from a policy perspective. (18) While a reduction in the number of firms in an industry does not directly indicate lower employment, in the public's eye it is associated with the decimation of skilled, highly paid "good" jobs.

2. Prior to the year of delisting, what were the financial characteristics of the firms that delisted?

The general impression about a "delisted firm" might be of a firm in severe financial distress that has run out of cash, but the statistics do not support that idea. There are multiple reasons why a firm may file a delisting notification, including merger with another company, reducing the number of exchanges on which the stock is traded, going private, violating stock exchange listing requirements, and financial distress (perhaps leading to bankruptcy).

In Table 2, which shows descriptive financial data for delisted companies in the year prior to delisting, we find lower mean values for cash, total assets, revenue, and net income for involuntarily delisted firms compared to voluntarily delisted firms, which have lower market values and cash as a percentage of total assets. In fact, cash as a percent of total assets is highest for involuntarily delisted firms. As firms enter financially difficult periods, it appears they conserve cash by perhaps converting assets to cash, deferring new projects, and possibly postponing the replacement of capital equipment.

In contrast, voluntarily delisted firms have lower median values for cash, total assets, revenue, and market value compared to involuntarily delisted firms, which have lower net income. This indicates that, for our sample, firms that delist voluntarily are more likely to be larger firms in terms of total assets, and involuntarily delisted firms are more likely to be smaller. Also, when all delisted firms are compared to the firms that did not delist, the firms remaining listed generally are larger in terms of total assets and have larger mean and median values for cash, total assets, revenue, net income, and market value.

3. Was it more likely that a firm delisted involuntarily or voluntarily?

A total of 293 firms (62.7%) delisted involuntarily, while 174 firms (37.3%) delisted voluntarily. As Table 3 indicates, the most delistings occurred from NASDAQ (N=210, 45%), followed by NYSE (N=139, 29.8%) and AMEX (N=118, 25.3%). Almost 70% of firms left AMEX voluntarily, whereas NASDAQ's results are the opposite, with 69% of firms delisting involuntarily. Almost 81% of firms leaving NYSE were delisted involuntarily. Results for AMEX are possibly related to, at that time, the impending purchase of AMEX by NYSE.

4. Did firms switch to another prominent exchange? If so, to which?

As mentioned previously, one reason a firm might choose to delist is to switch to a different exchange (see Table 4). Firms voluntarily switching from AMEX most often went to NASDAQ (N = 40); followed by NYSE (N = 16); the pink sheets, which are stocks traded over the counter (N = 11); and the OTC Bulletin Board (OTCBB; N = 8), another over-the-counter system. Firms that involuntarily left AMEX primarily went to OTCBB (N = 14) or the pink sheets (N = 11). In one instance, a firm that was involuntarily delisted from AMEX switched to NASDAQ.

Firms voluntarily switching from NASDAQ went to the pink sheets (N = 27), NYSE (N = 14), OTCBB (N = 6), a NASDAQ subsidiary exchange (N = 3), and AMEX (N = 1). Firms involuntarily leaving NASDAQ most often went to the pink sheets (N = 79), followed by the OTCBB (N = 22), and three firms switched to a NASDAQ subsidiary exchange. NASDAQ subsidiary exchanges include NASDAQ Global Market, NASDAQ Capital Market, Philadelphia stock exchange, and Boston stock exchange.

Firms involuntarily leaving NYSE most often went to NASDAQ (N = 15) or switched to an NYSE subsidiary exchange (N = 10); one firm went to the pink sheets. Firms that involuntarily left NYSE most often went to the pink sheets (N = 25), followed by the OTCBB (N = 8) and an NYSE subsidiary exchange (N = 8). One firm went to AMEX. NYSE subsidiary exchanges include NYSE Alternext and NYSE Arca.

With a few minor exceptions, firms that delist involuntarily show a clear pattern between the three exchanges. (19) Mean and median financial metrics followed by this study were uniformly highest for firms leaving NYSE. The only exception is cash as a percentage of total assets, where the firms leaving NYSE had the lowest percentage. Almost the opposite is true of firms involuntarily delisting from AMEX, where we see most of the analyzed financial metrics are the smallest of the three exchanges. The primary exception is cash as a percentage of total assets, the highest value of the three exchanges. (20)

Descriptive statistics show that firms delisting involuntarily from AMEX are significantly smaller in terms of total assets (whether measured as the average or the median value) compared to firms that delist voluntarily from AMEX. Performance metrics for the involuntarily delisted firms are also lower than for their voluntary counterparts, with smaller mean and median revenues and lower mean and median net losses.

Thirty percent of firms leaving NASDAQ left voluntarily. These firms tended to have the smallest financial metrics measured in this study. Only the mean value of the market value of equity ranked lower for another exchange (AMEX). Median values for firms leaving NASDAQ consistently ranked between those leaving NYSE and AMEX. An exception is cash as a percentage of total assets, which was ranked the lowest of the three exchanges. Firms that voluntarily delisted from NASDAQ were more likely to be smaller firms.

Firms delisting voluntarily and involuntarily from NYSE had the largest financial metrics analyzed in this study, with cash as a percentage of total assets being the only exception. Firms voluntarily leaving AMEX had higher values of cash as a percentage of total assets, as did firms involuntarily leaving both AMEX and NASDAQ.

5. Why did the voluntary firms select to delist?

Most firms that voluntarily delisted cited switching to a new or different exchange as the reason (N = 130, 75%). Other reasons included being out of compliance with exchange requirements (N = 13, 8%), merging with another firm (N = 7, 4%), bankruptcy or liquidation (N = 7, 4%), or going private (N = 2, 1%). Firms that voluntarily delisted and cited switching to a new exchange as the reason were most likely to switch immediately to NASDAQ (N = 54, 42%) or NYSE (N = 34, 26%).

6. Disappearing act or still in the public eye--where are these firms today?

A considerable majority of the firms (N = 334, 72%) continued to exist in 2010, the year following the period we examined. There is a relation between the company's continued existence and whether the delisting was voluntary vs. involuntary (chi-square value of 36.8 using Fisher's exact test; p = 0.000). As Table 5 shows, firms that delisted involuntarily were less likely to still exist in 2010 (N = 179, 61%) compared to firms that delisted voluntarily (N = 155, 89%).

Firms that were no longer in existence in 2010 were about as likely to have been acquired or merged with another firm (N = 63, 49%) as to have gone bankrupt or been liquidated (N = 64, 50%). In addition, firms that still existed in 2010 were more likely to be publicly traded companies (N = 320, 96%) than private ones (N = 14, 4%). Table 6 shows the exchanges in which the delisted companies were traded in 2010.

Taking ACTION

Management accountants occupy vital roles throughout the life cycle of their firms. This includes staying abreast of potential financial challenges the firm might face as it evolves. Continued access to capital markets is one such challenge, especially for small firms and firms confronting financial difficulties. Figure 1 illustrates the ACTION tips that management accountants can follow to help a firm facing the prospect of delisting. Management accountants can help their firm navigate the multiple avenues to access capital markets to raise and trade equity capital.

The number of U.S. firms delisting from the major U.S. stock exchanges continues to grow unabated. Delisting could be in the foreseeable future for many more U.S. public firms. The results presented here should help provide an introduction to new terminology, statistics, and insights for anyone who might need to address the possibility of a firm delisting.

Endnotes

(1) Dorothy A. McMullen, Maria H. Sanchez, and David E. Stout, "Initial Public Offerings and the Role of the Management Accountant," Management Accounting Quarterly, Winter 2011, pp. 11-23.

(2) Regulations for remaining listed on a national security exchange are encompassed in the Securities Exchange Act of 1934. Deregistration is covered in Section 12(g). It is noted that delisting alone does not always eliminate public reporting requirements and many unlisted companies still incur reporting issues under Section 15(d) of the Act.

(3) See regulations under Section 15(d) of the Securities Exchange Act of 1934.

(4) Constant Djama, Isabelle Martinez, and Stephanie Serve, "What to Know About Delisting? A Survey of the Literature," working paper, University of Toulouse, 2012.

(5) Mark Jickling, "Sarbanes-Oxley and the Competitive Position of the U.S. Stock Markets," Congressional Research Service, Report for Congress, 2007.

(6) Thomas J. Donohue, "America's Capital Markets: An Agenda for Continued Success," presentation at Transatlantic Corporate Conference, September 2007, www.uschamber.com/press/ speeches/2007/americas-capital-markets-agenda-continued-success-remarks.

(7) Jeffrey H. Harris, Venkatesh Panchapagesan, and Ingrid M. Werner, "Off But Not Gone: A Study of Nasdaq Delistings," working paper, Ohio State University, 2008.

(8) Kenneth Lehn and Annette Poulsen, "Free Cash Flow and Stockholder Gains in Going Private Transactions," Journal of Finance, July 1989, pp. 771-787.

(9) Daniel A. Cohen, Aiyesha Dey, and Thomas Z. Lys, "The Sarbanes Oxley Act of 2002: Implications for Compensation Contracts and Managerial Risk-Taking," working paper, Northwestern University, 2007.

(10) Pete Collins, "Senior Executives Divided on Cost of Complying with Sarbanes-Oxley Act," PricewaterhouseCoopers Management Barometer, July 2, 2003, www.pwc.com/en_US/us/ sarbanes-oxley/assets/sarbanessurveyjuly2nd2003.pdf.

(11) Brian J. Bushee and Christian Leuz, "Economic Consequences of SEC Disclosure Regulation: Evidence from the OTC Bulletin Board," Journal of Accounting and Economics, June 2005, pp. 233-364.

(12) Not all components of SOX were effective at the same time. Section 404 was extended to fiscal years ending on or after December 15, 2004, for accelerated filers and to fiscal years beginning on or after December 15, 2007, for nonaccelerated filers.

(13) Anne Beyer, Daniel A. Cohen, Thomas Z. Lys, and Beverly R. Walther, "The Financial Reporting Environment: Review of the Recent Literature," Journal of Accounting and Economics, December 2010, pp. 296-343.

(14) Matt Krantz, "More Struggling Companies Delisted from Nasdaq, NYSE," USA Today, December 18, 2008; Kate Plourd, "Delisting Dilemmas," CFO Magazine, February 1, 2009.

(15) Harris, et al., 2008.

(16) Prior literature includes Christian Leuz, Alexander J. Triantis, and Tracy Yue Wang, "Why Do Firms Go Dark? Causes and Economic Consequences of Voluntary SEC Deregistrations," Journal of Accounting & Economics, August 2008, pp. 181-208.

(17) SEC delisting notifications were retrieved from Morningstar Document Research. Financial data was obtained from Compustat and SEC filings. Reasons for delisting and the follow-up data on private firms were hand-collected from corporate press releases, SEC filings, and other reliable sources.

(18) Hank Robison, "Why We Can't Shun Manufacturing for the Service Sector," March 17, 2011, www.newgeography.com/ content/002128-why-we-can%E2%80%99t-shunmanufacturing-service-sector.

(19) A detailed table of these results is available from the authors by request.

(20) Median net income is lower on NASDAQ than on AMEX.

Linda Campbell, Ph.D., CPA, is an assistant professor of accounting at Texas State University in San Marcos, Texas, and a member of the Austin Chapter of IMA[R]. She can be reached at Linda.Campbell@txstate.edu.

Robin Knowles, Ph.D., CFA, is an assistant professor of accounting at Texas State University in San Marcos, Texas, and a member of the Austin Chapter of IMA. She can be reached at rk24@txstate.edu.

Kasey Martin, Ph.D., CIA, CPA, is an assistant professor of accounting at Texas State University in San Marcos, Texas. She can be reached at Kasey.Martin@txstate.edu.
Table 1. Sample Firms Grouped by One-Digit SIC

One-Digit SIC Description            Involuntary      Voluntary

                                     Count   %        Count   %

0 Agricultural, Forestry, and          1       0.3%     0       0.0%
  Fishery
1 Mining and Construction             27       9.2%    11       6.3%
2 Manufacturing                       68      23.2%    26      14.9%
3 Manufacturing                       62      21.2%    48      27.6%
4 Transportation, Communications,     21       7.2%    22      12.6%
  & Public Utilities
5 Wholesale and Retail Trade          24       8.2%     7       4.0%
6 Finance, Insurance, and Real        50      17.1%    32      18.4%
  Estate
7 Services                            33      11.3%    18      10.3%
8 Services                             3       1.0%     8       4.6%
9 Nonclassifiable                      4       1.4%     2       1.1%
Total                                293     100.0%   174     100.0%

One-Digit SIC Description            Delisted Total   Listed Firms

                                     Count   %        Count    %

0 Agricultural, Forestry, and          1       0.2%       45     0.3%
  Fishery
1 Mining and Construction             38       8.1%    1,433    10.9%
2 Manufacturing                       94      20.1%    1,592    12.1%
3 Manufacturing                      110      23.6%    2,305    17.5%
4 Transportation, Communications,     43       9.2%    1,128     8.6%
  & Public Utilities
5 Wholesale and Retail Trade          31       6.6%      798     6.1%
6 Finance, Insurance, and Real        82      17.6%    3,881    29.4%
  Estate
7 Services                            51      10.9%    1,434    10.9%
8 Services                            11       2.4%      351     2.7%
9 Nonclassifiable                      6       1.3%      222     1.7%
Total                                467     100.0%   13,189   100.0%

SIC codes are taken from the first digit for firms in the sample.
Data for delisted firms was hand-collected from publicly available
information for firms that announced their delisting in the years
2008 and 2009. Data for listed firms is from the universe of listed
firms in Compustat for the years 2005-2008.

Table 2. Descriptive Financial Data for the Year Prior
to Delisting

                             Voluntary    Involuntary

Cash                p25           2.2         2.6
                    mean        295.3       161.6
                    median        7.5        12.4
                    p75          33.0        58.3
Cash as a percent   p25           0.018       0.018
of total assets     mean          0.154       0.173
                    median        0.065       0.064
                    p75           0.209       0.235
Total Assets        p25          30.8        24.4
                    mean     18,179.1     2,764.6
                    median      119.7       176.2
                    p75         597.5       893.3
Revenue             p25          22.2        12.3
                    mean      1,831.0     1,106.1
                    median       62.2       105.6
                    p75         282.2       601.2
Net Income          p25          (4.1)      (21.7)
                    mean         93.7        77.2
                    median        2.0        (5.3)
                    p75          12.4        17.2
Market Value        p25          30.0        23.1
                    mean      1,414.4     1,582.9
                    median       82.2        86.5
                    p75         345.4       382.7

                             All Delisted   Listed

Cash                p25          2.4             2.3
                    mean       211.5           356.6
                    median       9.7            15.7
                    p75         45.6            79.6
Cash as a percent   p25          0.018           0.017
of total assets     mean         0.166           0.150
                    median       0.064           0.061
                    p75          0.215           0.196
Total Assets        p25         26.2            40.1
                    mean     8,759.1        10,588.3
                    median     143.2           285.5
                    p75        807.9         1,684.4
Revenue             p25         15.0            15.8
                    mean     1,383.5         2,913.4
                    median      79.6           125.5
                    p75        487.0           940.9
Net Income          p25        (14.4)           (6.3)
                    mean        83.4           149.9
                    median      (0.7)            1.9
                    p75         15.6            41.3
Market Value        p25         26.2            24.4
                    mean     1,518.5         2,050.1
                    median      86.0           126.2
                    p75        368.0           647.0

Note: Figures are in millions. Data for delisted firms
was hand-collected from publicly available information
for firms that announced their delisting in 2008 and
2009. Figures for delisted firms are from the year
prior to their delisting, either 2007 or 2008. Figures
for listed firms are from the universe of listed firms
in Compustat for 2007 to 2008.

Table 3. Delisted Firms by Exchange

         Involuntary

         Count     % of         % of
                 "exchange   Involuntary
                   from"

AMEX      36       30.5%        12.3%
NASDAQ    145      69.0%        49.5%
NYSE      112      80.6%        38.2%
Total     293      62.7%       100.0%

         Voluntary

         Count     % of        % of
                 "exchange   Voluntary
                   from"

AMEX      82       69.5%       47.1%
NASDAQ    65       31.0%       37.4%
NYSE      27       19.4%       15.5%
Total     174      37.3%      100.0%

         Total

         Count    % of
                 total

AMEX      118     25.3%
NASDAQ    210     45.0%
NYSE      139     29.8%
Total     467    100.0%

Data for delisted firms was hand-collected from publicly
available information for firms that announced their
delisting in 2008 and 2009. NASDAQ includes subsidiary
exchanges: NASDAQ Global Market, NASDAQ Capital Market,
Philadelphia stock exchange, and Boston stock exchange.
NYSE includes subsidiary exchanges: NYSE Alternext and
NYSE Arca. A firm is identified as voluntary if Form 25
was filed with the SEC and involuntary if Form 25-NSE
was filed.

Note: Pearson Chi-Square Test

Value: 74.9288

df: 2

Sig. (2-tail): 0.000

Table 4. The Exchanges the Delisted Firms Switched
to Immediately

Changed   Voluntary/    Changed To
From      Involuntary

                        AMEX   NASDAQ   NYSE   OTCBB

AMEX      Voluntary       0       40     16       8
                         0%      48%    19%     10%
          Involuntary     0        1      0      14
                         0%       3%     0%     44%
NASDAQ    Voluntary       1        3     14       6
                         2%       5%    22%      9%
          Involuntary     0        3      0      22
                         0%       2%     0%     15%
NYSE      Voluntary       0       15     10       0
                         0%      54%    36%      0%
          Involuntary     1        0      8       8
                         1%       0%     7%      7%
          Totals          2       62     48      58

Changed   Voluntary/    Changed To
From      Involuntary

                        Pink     None   Totals
                        Sheets

AMEX      Voluntary        11      8       83
                          13%    10%     100%
          Involuntary      11      6       32
                          34%    19%     100%
NASDAQ    Voluntary        27     14       65
                          42%    22%     100%
          Involuntary      79     41      145
                          54%    28%     100%
NYSE      Voluntary         1      2       28
                           4%     7%     100%
          Involuntary      25     72      114
                          22%    63%     100%
          Totals          154    143      467

Data for delisted firms was hand-collected from publicly
available information for firms that announced their
delisting in 2008 and 2009. NASDAQ includes subsidiary
exchanges: NASDAQ Global Market, NASDAQ Capital Market,
Philadelphia stock exchange, and Boston stock exchange.
NYSE includes subsidiary exchanges: NYSE Alternext and
NYSE Arca. A firm is identified as voluntary if Form 25
was filed with the SEC and involuntary if Form 25-NSE
was filed.

Table 5. Does the Company Still Exist After Delisting?

                         Involuntary    Voluntary      Total

                         Count    %     Count          Count    %

Company still exists      179     61%    155     89%    334     72%
Company does not exist    110     38%     19     11%    129     28%
Company emerged             4      1%      0      0%      4      1%
  from bankruptcy
Total                     293    100%    174    100%    467    100%

Data for delisted firms was hand-collected from publicly available
2008 and 2009.

Table 6. Exchanges Delisted Companies Trade on
One to Two Years after Delisting

              AMEX   NASDAQ   NYSE   OTCBB    Pink    None   Total
                                             Sheets

Voluntary      1       58      40     14       39       3     155
Involuntary    1        4       5     43      115      11     179
Total          2       62      45     57      154      14     334

Data for delisted firms was hand-collected from publicly available
information for firms that announced their delisting in 2008 and 2009.

Figure 1. ACTION Tips

Awareness

Learn as much as possible about the delisting process--including
positive and negative challenges--by staying aware of information
gleamed from delisted companies.

Compliance

Stay up-to-date with all related legal issues, including SEC
requirements. This includes working with the legal department or
outside counsel and external auditors to ensure that the firm stays
in compliance by filing all required forms on a timely basis.

Timing

Know that "if and when" to delist is a financial as well as a
public relations decision. Financial managers and nonfinancial
managers within the firm should communicate routinely throughout
the process to limit misunderstanding and missed opportunities.

Informed

Management accountants must stay in front of all financial
pitfalls, such as earnings management--on all scales and throughout
all departments--and act accordingly, realizing that such
activities start early in the process.

Options

Backup scenarios must be considered! Know before a delisting plan
is put into motion what alternative action is laid out for each
projected step forward.

New Beginnings

Stay positive at every turn. Delisting is stressful--for the
company and for its employees. Push forward through each challenge
and expect a better future for all involved.
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Author:Campbell, Linda; Knowles, Robin; Martin, Kasey
Publication:Management Accounting Quarterly
Date:Jan 1, 2014
Words:5418
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