The Effects of the Financial Crisis on Delisting Decisions: Evidence from Family and Non-Family Firms in Germany

The global financial crisis significantly affected the viability of the financial system and the structure of equity markets. In this study, we investigate the phenomenon of family and non-family firms’ delisting decisions from the Prime Standard, the highest regulated stock market segment in Germany. We use a sample of 107 family and non-family firms and focus on the delisting decisions for the periods around the financial crises (2003-2015). We use valuation effects as well as logit and firm-fixed effects regressions to provide new evidence why firms leave the highest equity market segments before and subsequent to the crisis. We observe a different behavior for family and non-family firms and the empirical evidence suggests that family firms favor to list in the Prime Standard before the crisis but are more likely to switch to a lower market segment subsequently. We also find that firms changing the market segment underperform prior and subsequent to the crisis, but the order of relative performance between family and non-family firms substantially reverses after the crisis. Firms staying listed on the Prime Standard perform well and possess higher growth opportunities relative to the firms that transfer to a lower market segment. Hence, the firms’ cost-benefit considerations are an im-portant explanation for determining the favored stock market segment and the switch to a less regulated market environment. Most importantly, the financial crisis had a significant effect on firms’ reassessing their initial listing decisions.