This paper analyzes the information effect of involuntary delisting and the possibility of informed trading in the Korean stock market. We find that stock prices fall by 70-80% due to involuntary delisting in the Korean market, where liquidity all but disappears as a result of
delisting unlike the U.S. market, where delisted stocks continue to be traded in the over-thecounter market. Prior to delisting, however, individual investors are net buyers of delisted firms while both institutional and foreign investors are net sellers. In addition, the share
ownership of large shareholders, on average, declines by 25%-35% over the course of two years prior to involuntary delisting. Finally, we find evidence that rather than correctly anticipating the delisting of the firms, institutional and foreign investors have sold their shares defensively in fear of the possibility of further fall in stock prices whereas large shareholders reduce their share ownership in anticipation of delisting. In conclusion, the huge loss from involuntary delisting is primarily concentrated on individual investors suggesting that in the emerging markets delisting does not function well as a mechanism to secure investor protection.
학회 소식
공지사항
[2014년 제 1차] Delisting and Information Asymmetry
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2014-02-26