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Why Do Firms Go Dark?

Published online by Cambridge University Press:  06 April 2009

András Marosi  and
Nadia Massoud
András Marosi
Affiliation:
amarosi@ualberta.ca, Department of Finance and Management Science, University of Alberta, Edmonton, AB, T6G 2R6, Canada.
Nadia Massoud
Affiliation:
nmassoud@ualberta.ca, Department of Finance and Management Science, University of Alberta, Edmonton, AB, T6G 2R6, Canada.
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Abstract

In recent years, a number of firms and banks have decided to “go dark,” i.e., deregister with the Securities and Exchange Commission and delist from the major exchanges despite having a large number of outside shareholders. This paper seeks to answer two important questions: Why do firms choose to go dark? What are the consequences for shareholders? We find that firms with fewer valuable growth opportunities, greater insider ownership, lower institutional ownership, higher leverage, and lower market momentum are more likely to go dark. Furthermore, the cost of regulatory compliance is a driving force behind the going dark phenomenon.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 42 , Issue 2 , June 2007 , pp. 421 - 442
Copyright
Copyright © School of Business Administration, University of Washington 2007

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