This study examines the effects of delisting on firm value, risk and market liquidity. In a world where markets are becoming increasingly integrated, delistings may prove counter productive. We use the unique event, free from company specifics, that occurred on January 2, 1990 in the stock exchanges of Singapore and Malaysia to test for the above effects. On that day, dual listed companies were required to delist from the foreign stock exchange. We also use this event to test if the Singapore and Malaysia markets are globally integrated. Since financial data is found to show persistence in volatility, we model the return generating process in a generalized autoregressive conditionally heteroskedastic (GARCH) framework that takes into consideration changing volatility. For comparison purposes, OLS and Time-Deformation models are included. The study found delistings to decrease firm value, the size of which is related to how actively the stocks were previously traded on the foreign stock exchange. Risk levels increased following delistings. Nevertheless, thinly traded stocks showed significant changes in neither firm value nor riskiness. Further evidence of new listings to increase firm value was noted. Consistent with the political motive hypothesis, delisted stocks showed an increase in post-event volume, but however, lost relative liquidity compared with other stocks. While all portfolios considered show evidence for existence of conditional heteroskedasticity, comparison with standard OLS event-study results yields similar conclusions, although the return generating models with GARCH errors result in lower abnormal return variances. As for the time-deformation model, trading volume was found to be a good proxy for rate of information flow only for smaller capitalized stocks. Correlation and regression analyses showed that the Singapore and Malaysia markets are integrated to some degree with the international markets, such that a major delistings event between both markets did not change the pricing of risk …
The theme of this study is that seven major East Asian less developed countries (LDCs) have experienced "dependent development," and that some internal and external intervening factors mattered in that process. Utilizing a framework of "dependent development," the data analysis deals with the political economy of development in these countries. This analysis supports the fundamental arguments of the dependent development perspective, which emphasize positive effects of foreign capital dependence in domestic capital formation and industrialization in East Asian LDCs. This perspective assumes the active role of the state, and it is found here to be crucial in capital accumulation and in economic growth. This cross-national time-series analysis also shows that the effects of external dependence and military spending on capital accumulation and economic growth can be considered as a regional phenomenon. The dependent development perspective offers a useful way to understand economic dynamism of East Asian LDCs for the past two decades.
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