The role of accounting information in security exchange delisting

Chen, Kelvin C.W.; Schoderbek, Michael P.

doi:10.1016/s0278-4254(98)10015-7

Cited by 19 publications

(13 citation statements)

References 9 publications

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“…Delisting regulations in developed markets such as the United Kingdom and the United States focus less on historical accounting numbers and more on market‐based information, including market capitalization, closing stock price, public float, and public round lot shareholders (Baker and Meeks, ; Clyde et al., ; Chen and Schoderbek, ; Leuz et al., ) . Prior research finds that involuntarily delisted firms in developed markets experienced significant stock price declines, reduced liquidity of their shares, and elevated stock return volatility before being delisted (Sanger and Peterson, ; Baker and Meeks, ; Macey et al., ).…”

Section: Delisting Regulations In China's Stock Market and More Develmentioning

confidence: 99%

“…By encouraging firms to “clear the decks” for future profits, the delisting regulation probably distorts the distribution of Chinese firms’ earnings and results in a disproportionate number of big‐bath loss firm‐years in the lowest decile of accruals. Because the regulation's “ST” status or ultimate delisting imposes trading, liquidity, and other costs on firms (Baker and Meeks, ; Chen and Schoderbek, ; Leuz et al., ), the regulation provides a remarkably clear incentive—and potentially observable pattern—for managed earnings by financially distressed firms once they approach or enter ST status.…”

Section: Introductionmentioning

confidence: 99%

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Earnings Management and the Accrual Anomaly: Evidence from China

Niu

Zhang

et al. 2011

J. Int. Financ. Manage. Account.

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Using the unique Chinese setting in which the "delisting regulation" is based on accounting numbers, we separate earnings management into (1) earnings management responding to regulation and (2) earnings management prompted by market pressures and further document that earnings management responding to market pressures produces the accrual anomaly (Sloan, 1996) and earnings management responding to regulation does not. Initially unable to detect the accrual anomaly in China's stock market, we were reluctant to conclude that China's market is more efficient than that in the United States. After observing a disproportionate number of "big-bath" loss firm-years in the lowest decile of accruals for our sample, we estimated the apparent earnings distortion induced by the delisting regulation. When we excluded this distortion from our analysis, we documented the presence of the accrual anomaly in China's stock market. We conclude that the delisting regulation creates an artificial distribution of firm earnings in China that affects the market pricing of accruals and masks the accrual anomaly. The results have implications for policy makers and regulators in general, and those in emerging markets in particular.

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Section: Delisting Regulations In China's Stock Market and More Develmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Earnings Management and the Accrual Anomaly: Evidence from China

Niu

Zhang

et al. 2011

J. Int. Financ. Manage. Account.

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“…(), and always very costly socially for the delisted firm. It is thus unsurprising that Chen and Schoderbek () find it difficult to obtain complete and precise information on the way the AMEX makes its delisting decisions. Macey et al .…”

Section: Reasons For Involuntary Delistingmentioning

confidence: 99%

“…The delisting process per se is complex, as highlighted by Macey et al (2008), and always very costly socially for the delisted firm. It is thus unsurprising that Chen and Schoderbek (1999) find it difficult to obtain complete and precise information on the way the AMEX makes its delisting decisions. Macey et al (2008) suggest that the delisting dilemma may be solved by transferring responsibilities to a regulatory body, or by sharing responsibilities between the stock exchanges and the SEC in the USA.…”

Section: Violation Of Stock Exchange Requirements: the Effectiveness mentioning

confidence: 99%

Reasons for Delisting and Consequences: A Literature Review and Research Agenda

Martínez

Serve

2016

Journal of Economic Surveys

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This paper discusses the literature on delisting, drawing on USA and international evidence. Given the great heterogeneity in delisting operations, we first consider the standard existing typology based on the initiator of the delisting (the stock market authorities, or the firm itself). Second, while managers often cite high compliance costs (especially due to Sarbanes–Oxley Act implementation) as the official reason for the voluntary delisting of their firm, we highlight that firms face different trade‐offs in their delisting decision. We also examine the reasons for involuntary delisting, especially the delisting dilemma faced by stock market authorities when the firm violates the listing requirements. Next, we review the economic consequences of delisting in terms of value creation or value destruction for shareholders. Finally, noting gaps in the literature and other contrasting results, we propose suggestions for future research.

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“…Through conducting sample tests on several companies in the United States, Martin and Ohlson [4] got the conclusion that Logistic features higher accuracy as financial distress prediction model. Likely, in China, by contrasting single variable analysis and multivariate linear decision for the same sample company, Chen Jing [5] (1999) concluded as follows: in single variable analysis, the misjudgment rate of liquidity ratio and debt ratio is lower than others. While multivariate linear decision indicates that six indicators, including debt ratio, rate of return on common stockholders' equity, liquidity ratio, working capital/ total assets, and turnover of total capital, may predict ST company in the first three years of suffering financial distress.…”

Section: Introductionmentioning

confidence: 99%