## 1 Introduction

^{1}During the last two decades, however, this trend started to reverse with declining numbers of initial public offerings and increasing records of delisting, resulting in a “listing gap”, which emerged in the US about 25 years ago and in Germany since the global financial crisis (2008/2009). Jensen (1989) already referred very early to this phenomenon as the “eclipse of the public corporation”, arguing that “takeovers, corporate breakups, divisional spin-offs, leveraged buyouts, and going-private transactions are the most visible manifestations of a massive organizational change in the economy”. This research gained momentum in recent years with studies investigating this “listing gap” especially in the US, analyzing the determinants and consequences of listing dynamics (Doidge et al. 2017; Lattanzio et al. 2022; Eckbo and Lithell 2022). This includes a wide-ranging discussion of the benefits and costs of private versus public equity markets (Ewens and Farre-Mensa 2020, 2022).

^{2}The Prime Standard segment is one of the most regulated stock market segment in Germany and has one of the highest requirements and transparency standards in Europe. Moreover, a listing in this segment was a prerequisite for inclusion in the blue-chip selection index DAX.

^{3}Other segments with less requirements are the General Standard, the Entry Standard (2005–2017) and Scale (since 2017). These segments have fewer transparency obligations, and compared to the Prime Standard do not require quarterly financial reports, analyst conferences and an up-to-date corporate calendar, and no simultaneous disclosure and ad-hoc notifications in English and German. The Online Appendix, Section A.1 provides more details about the different listing requirements.

Total | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|

Prime standard firms at beginning of the year | 329 | 324 | 306 | 320 | 338 | 360 | 359 | 326 | 313 | 317 | 306 | 292 | 290 | |

Prime standard firms at end of the year | 324 | 306 | 320 | 338 | 360 | 359 | 326 | 313 | 317 | 306 | 292 | 290 | 286 | |

Entries during the year | 200 | 6 | 10 | 27 | 37 | 33 | 12 | 6 | 6 | 16 | 10 | 12 | 10 | 15 |

Delistings during the year | 243 | 11 | 28 | 13 | 19 | 11 | 13 | 39 | 19 | 12 | 21 | 26 | 12 | 19 |

Down-listings | 107 | 6 | 12 | 5 | 14 | 2 | 5 | 22 | 7 | 8 | 9 | 10 | 3 | 4 |

…to General Standard | 79 | 6 | 12 | 5 | 13 | 2 | 5 | 16 | 4 | 6 | 4 | 2 | 2 | 2 |

…to Entry Standard | 19 | 4 | 2 | 4 | 6 | 1 | 2 | |||||||

…to m:access | 9 | 1 | 2 | 3 | 1 | 2 | ||||||||

Exits | 136 | 5 | 16 | 8 | 5 | 9 | 8 | 17 | 12 | 4 | 12 | 16 | 9 | 15 |

…due to going private | 22 | 0 | 1 | 1 | 0 | 1 | 1 | 3 | 2 | 0 | 2 | 3 | 2 | 6 |

…due to acquisition | 61 | 2 | 9 | 3 | 4 | 6 | 2 | 9 | 6 | 2 | 4 | 7 | 4 | 3 |

…due to insolvency | 53 | 3 | 6 | 4 | 1 | 2 | 5 | 5 | 4 | 2 | 6 | 6 | 3 | 6 |

Net effect | − 43 | − 5 | − 18 | 14 | 18 | 22 | − 1 | − 33 | − 13 | 4 | − 11 | − 14 | − 2 | − 4 |

^{4}

## 2 Hypothesis development

^{5}The potential benefits of opting for a listing in a more regulated market segment are higher stock liquidity, increased visibility and usually higher firm valuation, which is a prerequisite for issuing new equity at attractive terms. Indeed, access to additional equity is often the major argument for a public listing. This is especially true for high-growth companies with substantial investment opportunities but financial constraints (Kim and Weisbach 2008). In contrast, firms with a lack of growth opportunities and lower public equity needs or with access to alternative financing sources such as private equity have a higher probability of staying private or of going private again after some time of being public. Consistent with this notion, Lehn and Poulsen (1989) and Doidge et al. (2017) document a negative relationship between sales and asset growth and delistings of US firms. There also exists a negative relationship between the market-to-book ratio or Tobin’s Q and the probability to delist from European public markets (Kashefi Pour and Lasfer 2013; Thomsen and Vinten 2014). Firms might actively reconsider their segment choice if investors have less confidence in the firm’s growth opportunities, resulting in lower firm valuations. Consequently, our first hypothesis states:

H1: Firms with low market valuation (Tobins Q) have a higher probability to transfer to a lower market segment.

^{6}When these benefits decrease over the life cycle of a firm or do not materialize as expected, the firm is more likely to delist from the market segment. Therefore, we formulate our second hypothesis as follows:

H2: Firms with low stock liquidity (Turnover by Volume) have a higher probability to transfer to a lower market segment.

^{7}Consequently, smaller firms might have a higher propensity to revisit their segment choice, as listing requirements are uniform and listing costs are relatively more burdensome for them. Empirical evidence supporting the size effects is provided by Bharath and Dittmar (2010) and Mehran and Peristiani (2010) for the US, Thomsen and Vinten (2014) for Europe as well as Aslan and Kumar (2011) and Kashefi Pour and Lasfer (2013) for the UK. Thus, we hypothesize:

H3: Smaller firms have a higher probability to transfer to a lower market segment.

^{8}Moreover, they often do not attract enough investors to justify their listing and trading in a higher market segment. In addition, low share prices expedite the segment migration, as shares are more easily bought back to gain sufficient voting support for this decision. Consequently, we conjecture in our fourth hypothesis:

H4: Low performing firms have a higher probability to transfer to a lower market segment.

^{9}One potential response for escaping these additional burdens is to delist from a market segment, such as down-listing to lower market segments or going private (Berninger et al. 2018) or dark.

^{10}Therefore, we postulate the following fifth hypothesis:

H5: Higher costs from capital market or corporate governance regulations increase the probability that a firm will transfer to a lower market segment.

H6: Firms with a corporation (founding family) as controlling shareholder have a higher (lower) probability to transfer to a lower market segment.

## 3 Data and sample description

### 3.1 Sample construction

^{11}We provide a detailed description of the listing requirements at Deutsche Börse after 2003 in the Online Appendix, Section A.1, Table A.1.

^{12}) and excluding foreign issuers (identified by Non-German ISINs), we end up with a final sample of 518 firms and 5,527 firm-year observations.

^{13}Second, we collect detailed information on the listing history of our sample firms to track their listing status at each point in time during the sample period. Therefore, we hand-collected information on listing and delisting decisions using several public sources such as ad-hoc announcements, annual reports, press articles and official notifications by Deutsche Börse. For 243 of our 518 sample firms, we are able to identify an event where a company previously listed in the Prime Standard delisted from this market segment during our sample period.

^{14}Second, “going private” when the firm leaves the stock exchange because of voluntarily delisting. Other exit reasons are “mergers & acquisitions” when the firm is acquired or merged and “insolvencies” when the firm files for insolvency and disappears from the Prime Standard.

### 3.2 Sample composition and flows

### 3.3 Descriptive analysis of firm characteristics

Variable | Description and construction | Data source |
---|---|---|

Tobins Q | Total assets plus the market value of equity minus the book value of equity divided by total assets. | Refinitiv Worldscope/Authors’ Calculation |

Size | Total assets of a firm in EUR 1,000, logarithmized. | Refinitiv Worldscope/Authors’ Calculation |

Return on assets | Net income relative to total assets. | Refinitiv Worldscope/Authors’ Calculation |

Leverage | Total debt relative to total assets. | Refinitiv Worldscope/Authors’ Calculation |

Equity issuance | Net proceeds a company receives from the issue of common and preferred stock relative to total assets. | Refinitiv Worldscope/Authors’ Calculation |

Firm age | Difference between current year and the founding year of a company, logarithmized. | Refinitiv Worldscope/Authors’ Calculation |

Turnover by volume | Average number of shares traded over a year, logarithmized. | Refinitiv Worldscope/Authors’ Calculation |

Free float | The percentage of total shares that is available to ordinary investors, which is the total number of shares less holdings of 5% or more. | Refinitiv Datastream/Authors’ Calculation |

Audit fees | Amount of fees paid for auditing services in EUR 1,000, logarithmized. | Refinitiv Datastream ASSET 4 ESG/Annual Reports |

Founding family | Dummy variable that is one if a founding family holds more than 25% of the voting rights, zero otherwise. | Hoppenstedt Aktienführer/Authors’ Calculation |

Financial investor | Dummy variable that is one if a financial investor holds more than 25% of the voting rights, zero otherwise. | Hoppenstedt Aktienführer/Authors’ Calculation |

Bank | Dummy variable that is one if a bank holds more than 25% of the voting rights, zero otherwise. | Hoppenstedt Aktienführer/Authors’ Calculation |

Corporation | Dummy variable that is one if a corporation holds more than 25% of the voting rights, zero otherwise. | Hoppenstedt Aktienführer/Authors’ Calculation |

Government | Dummy variable that is one if a government holds more than 25% of the voting rights, zero otherwise. | Hoppenstedt Aktienführer/Authors’ Calculation |

Panel A: Firm characteristics of firm delistings | |||||||
---|---|---|---|---|---|---|---|

Variable | Delisting firms | Staying firms | Difference in | ||||

Mean | Median | Mean | Median | Mean | Median | ||

Tobins Q | 1.518 | 1.219 | 1.531 | 1.213 | − 0.013 | 0.006 | |

Size | 11.536 | 11.190 | 12.670 | 12.196 | − 1.134*** | − 1.006*** | |

Return on assets | − 0.095 | − 0.012 | − 0.020 | 0.026 | − 0.075** | − 0.038*** | |

Leverage | 0.196 | 0.117 | 0.210 | 0.166 | − 0.014 | − 0.049* | |

Equity issuance | 0.012 | 0.000 | 0.025 | 0.000 | − 0.013** | 0.000*** | |

Turnover by volume | 5.464 | 5.447 | 6.604 | 6.662 | − 1.140*** | − 1.215*** |

Panel B: Firm characteristics of down-listings | |||||||
---|---|---|---|---|---|---|---|

Variable | Delisting firms | Staying firms | Difference in | ||||

Mean | Median | Mean | Median | Mean | Median | ||

Tobins Q | 1.353 | 1.101 | 1.531 | 1.213 | − 0.182* | − 0.113** | |

Size | 11.145 | 10.705 | 12.670 | 12.196 | − 1.526*** | − 1.491** | |

Return on assets | − 0.119 | − 0.030 | − 0.020 | 0.026 | − 0.100*** | − 0.056** | |

Leverage | 0.207 | 0.122 | 0.210 | 0.166 | − 0.003 | − 0.044** | |

Equity
issuance | 0.013 | 0.000 | 0.025 | 0.000 | − 0.0118* | 0.000*** | |

Turnover by volume | 5.595 | 5.504 | 6.604 | 6.662 | − 1.000*** | − 1.15** |

Panel C: Firm characteristics of mergers | ||||||
---|---|---|---|---|---|---|

Variable | M&A firms | Staying firms | Difference in | |||

Mean | Median | Mean | Median | Mean | Median | |

Tobins Q | 2.116 | 1.211 | 1.531 | 1.213 | 0.587* | 0.488 |

Size | 12.657 | 12.168 | 12.670 | 12.196 | 0.015 | 0.885* |

Return on assets | − 0.045 | 0.026 | − 0.020 | 0.026 | − 0.024 | − 0.042 |

Leverage | 0.15 | 0.165 | 0.210 | 0.166 | − 0.060 | − 0.115* |

Equity issuance | 0.007 | 0.000 | 0.025 | 0.000 | − 0.018* | 0.000** |

Turnover by volume | 4.734 | 6.647 | 6.604 | 6.662 | − 1.850*** | − 1.750** |

Panel D: Firm characteristics of insolvencies | ||||||
---|---|---|---|---|---|---|

Variable | Insolvent firms | Staying firms | Difference in | |||

Mean | Median | Mean | Median | Mean | Median | |

Tobins Q | 2.13 | 1.738 | 1.531 | 1.213 | 0.600 | 0.525*** |

Size | 10.572 | 11.189 | 12.670 | 12.196 | − 2.073* | − 0.984 |

Return on assets | − 0.517 | − 0.578 | − 0.020 | 0.026 | − 0.497 | − 0.604* |

Leverage | 0.436 | 0.432 | 0.210 | 0.166 | − 0.227 | 0.267 |

Equity issuance | 0.000 | 0.000 | 0.025 | 0.000 | − 0.025*** | 0.000*** |

Turnover by volume | 8.111 | 8.600 | 6.604 | 6.662 | 1.537 | 1.962*** |

Panel E: Firm characteristics of going privates | ||||||
---|---|---|---|---|---|---|

Variable | Going priv. firms | Staying firms | Difference in | |||

Mean | Median | Mean | Median | Mean | Median | |

Tobins Q | 1.856 | 1.213 | 1.531 | 1.213 | 0.325 | 0.198 |

Size | 13.199 | 12.168 | 12.670 | 12.196 | 0.557 | 0.051 |

Return on assets | 0.075 | 0.026 | − 0.020 | 0.026 | 0.096** | 0.016* |

Leverage | 0.186 | 0.165 | 0.210 | 0.166 | − 0.023 | − 0.096 |

Equity issuance | 0.009 | 0.000 | 0.025 | 0.000 | − 0.016* | 0.000* |

Turnover by volume | 5.962 | 6.639 | 6.604 | 6.662 | − 0.616 | − 0.120** |

## 4 Empirical analysis

### 4.1 Methodology

^{15}

### 4.2 Determinants of firm delisting

^{16}As expected, in Model 3 we observe that firms with higher stock liquidity do have a lower probability to down-list or exit from the segment. The coefficient of Turnover by Volume is significant at the 1% level. This indicates that firms with higher liquidity seem to benefit from the investor’s interests in their shares and the trading environment. Equity Issuance and Audit Fees correlate only insignificantly with the delisting from the Prime Standard. In Model 6, we add firm-fixed effects to account for unobserved firm heterogeneity.

^{17}We find that profitability measured by Return on Assets and stock market liquidity measured by Turnover by Volume remain negatively correlated with Firm Delisting. In contrast, Size becomes uninformative, once we add firm-fixed effects to the model. In the Online Appendix, Table A.5, we employ the free float of all outstanding shares as alternative measure for stock liquidity in the pooled and firm-fixed effect logit regressions. We still find a negative coefficient (Free Float) that is significant at the 1% level.

Panel A: Baseline | ||||||
---|---|---|---|---|---|---|

Model | I | II | III | IV | V | VI |

Sample | German Prime Standard firms (excl. insolvencies) | |||||

Dependent variable | Coeff. | Coeff. | Coeff. | Coeff. | Coeff. | Coeff. |

Firm delisting | [t-stat.] | [t-stat.] | [t-stat.] | [t-stat.] | [t-stat.] | [t-stat.] |

Pooled logit | FE logit | |||||

Tobins Q (t − 1) | − 0.085 | − 0.086 | − 0.088 | − 0.03 | − 0.063 | 0.025 |

[− 0.90] | [− 0.91] | [− 0.92] | [− 0.30] | [− 0.51] | [0.11] | |

Size (t − 1) | − 0.125*** | − 0.140*** | − 0.053 | − 0.126*** | − 0.143 | 0.668 |

[− 2.77] | [− 2.75] | [− 1.04] | [− 2.82] | [− 1.25] | [1.55] | |

Return on assets (t − 1) | − 1.087*** | − 1.126*** | − 1.215*** | − 1.212*** | − 1.126* | − 2.636*** |

[− 2.71] | [− 2.79] | [− 2.97] | [− 3.13] | [− 1.95] | [− 2.79] | |

Leverage (t − 1) | − 0.152 | − 0.169 | − 0.226 | − 0.141 | − 0.085 | − 2.347 |

[− 0.36] | [− 0.39] | [− 0.52] | [− 0.33] | [− 0.17] | [− 1.56] | |

Firm age (ln) (t − 1) | 0.1 | 0.017 | ||||

[0.97] | [0.14] | |||||

Turnover by volume (ln) (t − 1) | − 0.236*** | − 0.269*** | − 0.554*** | |||

[− 4.36] | [− 4.18] | [− 4.08] | ||||

Equity issuance ( t− 1) | − 2.051 | − 1.019 | 0.13 | |||

[− 1.63] | [− 0.75] | [0.08] | ||||

Audit fees (ln) (t − 1) | 0.146 | 0.494* | ||||

[0.91] | [1.87] | |||||

Year
FE | Yes | Yes | Yes | Yes | Yes | No |

Industry FE | Yes | Yes | Yes | Yes | Yes | No |

N | 4160 | 4160 | 4160 | 4160 | 3004 | 649 |

Panel B: Controlling shareholder | ||||||||
---|---|---|---|---|---|---|---|---|

Model | I | II | III | IV | V | VI | VII | |

Sample | German Prime Standard firms (excl. insolvencies) | |||||||

Dependent variable: | Coeff. | Coeff. | Coeff. | Coeff. | Coeff. | Coeff. | Coeff. | |

Firm delisting | [t-stat.] | [t-stat.] | [t-stat.] | [t-stat.] | [t-stat.] | [t-stat.] | [t-stat.] | |

Pooled logit | FE logit | |||||||

Tobins Q (t − 1) | − 0.094 | − 0.084 | − 0.085 | − 0.154 | − 0.07 | − 0.128 | − 0.127 | |

[− 0.98] | [− 0.89] | [− 0.89] | [− 1.55] | [− 0.74] | [− 1.28] | [− 0.73] | ||

Size (t − 1) | − 0.160*** | − 0.125*** | − 0.125*** | − 0.137*** | − 0.120*** | − 0.154*** | 0.369* | |

[− 3.56] | [− 2.77] | [− 2.77] | [− 2.91] | [− 2.60] | [− 3.05] | [1.78] | ||

Return on assets (t − 1) | − 1.006** | − 1.087*** | − 1.087*** | − 1.172*** | − 1.085*** | − 1.120*** | − 1.689*** | |

[− 2.41] | [− 2.71] | [− 2.71] | [− 2.76] | [− 2.71] | [− 2.58] | [− 3.08] | ||

Leverage (t − 1) | − 0.128 | − 0.149 | − 0.151 | − 0.199 | − 0.082 | 0.019 | − 0.286 | |

[− 0.30] | [− 0.35] | [− 0.35] | [− 0.47] | [− 0.19] | [0.04] | [− 0.34] | ||

Founding family (t − 1) | − 0.664*** | − 0.183 | − 1.168*** | |||||

[− 3.55] | [− 0.89] | [− 3.23] | ||||||

Financial investor (t − 1) | − 0.031 | 0.199 | 0.528 | |||||

[− 0.15] | [0.83] | [1.50] | ||||||

Bank (t − 1) | − 0.014 | 0.435 | 0.408 | |||||

[− 0.03] | [0.80] | [0.50] | ||||||

Corporation (t − 1) | 1.403*** | 1.512*** | 1.349*** | |||||

[7.88] | [7.80] | [3.80] | ||||||

Government (t − 1) | − 0.949 | − 2.247** | − 1.235 | |||||

[− 1.26] | [− 2.56] | [− 1.03] | ||||||

Year FE | Yes | Yes | Yes | Yes | Yes | Yes | No | |

Industry FE | Yes | Yes | Yes | Yes | Yes | Yes | No | |

N | 4160 | 4160 | 4160 | 4160 | 4160 | 4160 | 1313 |

### 4.3 Determinants of delisting reasons

Panel A: Baseline | ||||||
---|---|---|---|---|---|---|

Model | I | II | III | IV | V | VI |

Sample | German Prime Standard firms (excl. insolvencies) | |||||

Coeff. | Coeff. | Coeff. | Coeff. | Coeff. | Coeff. | |

[t-stat.] | [t-stat.] | [t-stat.] | [t-stat.] | [t-stat.] | [t-stat.] | |

Dependent variable | ‘Going Opaque’ | Down-listing | Merger | |||

Pooled logit | FE logit | Pooled logit | FE logit | Pooled logit | FE logit | |

Tobins Q (t − 1) | − 0.638*** | − 0.976** | − 0.791*** | − 1.134*** | 0.403*** | 3.174*** |

[− 2.81] | [− 2.51] | [− 2.97] | [− 2.66] | [2.83] | [3.27] | |

Size (t − 1) | − 0.326** | 0.286 | − 0.453*** | 0.483 | 0.245 | 4.720* |

[− 2.45] | [0.55] | [− 2.69] | [0.83] | [1.22] | [1.65] | |

Return on assets (t− 1) | − 1.825*** | − 1.791* | − 1.889** | − 1.756 | 0.836 | 3.715 |

[− 2.76] | [− 1.71] | [− 2.54] | [− 1.51] | [0.87] | [0.66] | |

Leverage (t − 1) | 0.407 | − 2.236 | 0.265 | − 1.311 | − 0.897 | − 6.078 |

[0.69] | [− 1.27] | [0.37] | [− 0.68] | [− 0.96] | [− 0.90] | |

Firm age (ln) (t − 1) | 0.041 | 0.15 | 0.005 | |||

[0.29] | [0.93] | [0.02] | ||||

Turnover by volume (ln) (t − 1) | − 0.191** | − 0.444*** | − 0.218** | − 0.421** | − 0.412*** | − 1.522*** |

[− 2.30] | [− 2.92] | [− 2.45] | [− 2.54] | [− 4.58] | [− 2.99] | |

Equity issuance (t − 1) | − 2.51 | − 3.268 | − 1.418 | − 1.268 | 1.163 | 12.047* |

[− 1.12] | [− 0.91] | [− 0.74] | [− 0.37] | [0.61] | [1.76] | |

Audit fees (ln) (t − 1) | 0.241 | 0.825*** | 0.238 | 0.548* | − 0.068 | − 0.718 |

[1.36] | [2.59] | [1.13] | [1.65] | [− 0.22] | [− 0.57] | |

Year FE | Yes | No | Yes | No | Yes | No |

Industry FE | Yes | No | Yes | No | Yes | No |

N | 3004 | 519 | 3004 | 442 | 2973 | 130 |

Panel B: Controlling shareholder —going opaque | ||||||
---|---|---|---|---|---|---|

Model | I | II | III | IV | V | VI |

Sample | German Prime Standard firms (excl. insolvencies) | |||||

Dependent variable | Coeff. | Coeff. | Coeff. | Coeff. | Coeff. | Coeff. |

‘Going Opaque’ | [t-stat.] | [t-stat.] | [t-stat.] | [t-stat.] | [t-stat.] | [t-stat.] |

Pooled logit | FE logit | |||||

Tobins Q (t − 1) | − 0.641*** | − 0.630*** | − 0.627*** | − 0.660*** | − 0.662*** | − 0.569** |

[− 3.89] | [− 3.87] | [− 3.81] | [− 4.05] | [− 3.99] | [− 2.45] | |

Size (t − 1) | − 0.260*** | − 0.242*** | − 0.240*** | − 0.245*** | − 0.259*** | 0.153 |

[− 4.08] | [− 3.73] | [− 3.69] | [− 3.76] | [− 3.94] | [0.68] | |

Return on assets (t − 1) | − 1.717*** | − 1.755*** | − 1.745*** | − 1.769*** | − 1.724*** | − 1.430** |

[− 3.68] | [− 3.84] | [− 3.82] | [− 3.82] | [− 3.64] | [− 2.46] | |

Leverage (t − 1) | 0.458 | 0.453 | 0.481 | 0.45 | 0.489 | 0.395 |

[0.94] | [0.92] | [0.97] | [0.92] | [1.00] | [0.44] | |

Founding family (t − 1) | − 0.400* | − 0.231 | − 1.114*** | |||

[− 1.85] | [− 0.95] | [− 2.76] | ||||

Financial investor (t − 1) | 0.093 | 0.172 | 0.391 | |||

[0.39] | [0.62] | [0.96] | ||||

Bank (t − 1) | − 0.295 | − 0.629 | 0.019 | |||

[− 0.49] | [− 0.82] | [0.02] | ||||

Corporation (t − 1) | 0.629** | 0.637** | 0.568 | |||

[2.48] | [2.28] | [1.39] | ||||

Year FE | Yes | Yes | Yes | Yes | Yes | No |

Industry FE | Yes | Yes | Yes | Yes | Yes | No |

N | 4160 | 4160 | 4160 | 4160 | 4160 | 999 |

Panel C: Controlling shareholder - down-listing | ||||||
---|---|---|---|---|---|---|

Model | I | II | III | IV | V | VI |

Sample | German Prime Standard firms (excl. insolvencies) | |||||

Dependent variable: | Coeff. | Coeff. | Coeff. | Coeff. | Coeff. | Coeff. |

Down-listing | [t-stat.] | [t-stat.] | [t-stat.] | [t-stat.] | [t-stat.] | [t-stat.] |

Pooled Logit | FE Logit | |||||

Tobins Q (t − 1) | − 0.770*** | − 0.758*** | − 0.756*** | − 0.793*** | − 0.798*** | − 0.661** |

[− 4.03] | [− 3.96] | [− 3.94] | [− 4.23] | [− 4.08] | [− 2.57] | |

Size (t − 1) | − 0.384*** | − 0.365*** | − 0.368*** | − 0.373*** | − 0.386*** | 0.001 |

[− 4.88] | [− 4.59] | [− 4.58] | [− 4.72] | [− 4.83] | [0.01] | |

Return on assets (t − 1) | − 1.653*** | − 1.687*** | − 1.669*** | − 1.703*** | − 1.638*** | − 1.260** |

[− 3.36] | [− 3.50] | [− 3.44] | [− 3.47] | [− 3.24] | [− 2.08] | |

Leverage (t − 1) | 0.501 | 0.524 | 0.546 | 0.494 | 0.583 | 0.592 |

[0.91] | [0.94] | [0.98] | [0.90] | [1.06] | [0.63] | |

Founding family (t − 1) | − 0.351 | − 0.21 | − 0.838* | |||

[− 1.50] | [− 0.80] | [− 1.93] | ||||

Financial investor (t − 1) | − 0.211 | − 0.123 | 0.073 | |||

[− 0.72] | [− 0.36] | [0.15] | ||||

Bank (t − 1) | − 0.548 | − 0.714 | − 0.148 | |||

[− 0.74] | [− 0.76] | [− 0.15] | ||||

Corporation (t − 1) | 0.699** | 0.698** | 0.637 | |||

[2.55] | [2.32] | [1.41] | ||||

Year FE | Yes | Yes | Yes | Yes | Yes | No |

Industry FE | Yes | Yes | Yes | Yes | Yes | No |

N | 4160 | 4160 | 4160 | 4160 | 4160 | 874 |

#### 4.3.1 Going opaque

^{18}In addition, the coefficient of Audit Fees is positive and significant at the 5% level. As a proxy for increasing regulatory demands, we interpret this result in such a way that increasing costs might decrease the net benefits of listing, and therefore increases the incentives for migrating (down-list) to a lower market segment or for a going private. Both implies significantly lower costs for compliance with capital market regulation and corporate governance standards.

^{19}In contrast, we do not find a statistically significant relationship between Equity Issuance and the probability for this Going Opaque group.

#### 4.3.2 Segment changes

#### 4.3.3 Acquisitions

^{20}Firm size (Size) is statistically insignificant. Taking unobserved firm heterogeneity into account (Model 6), firms with increasing growth opportunities (Tobins Q) are more likely to become merger or acquisition targets. Firms with increasing Size have a higher probability of being acquired. However, the coefficient is only significant at the 10% level. Moreover, the probability of an acquisition or merger is lower for firms with increasing market liquidity. This event also appears to be more likely when Equity Issuance increases over time, but the coefficient here is only weakly statistically significant. These results are opposite compared to our Going Opaque group, firms that either down-list or go private, which obviously highlights the fundamental differences of these economic events.

### 4.4 Robustness test: alternative regression model

^{21}Table 6 presents the results from the Cox proportional hazard model described in Sect. 4.1. In Model 1, the delisting events are firms that have down-listed to a lower market segment or opted for going private. The coefficients of Tobins Q, Size, Return on Assets and Turnover by Volume are negative and significant at the 1% level. Moving to Model 2, where the delisting events are restricted to only those firms that changed the segment and down-listed. It becomes evident that Tobins Q, Size, Return on Assets and Turnover by Volume are negative and significant at the 1 and 5% level, respectively. In Model 3, the exit event contains only cases where the firm merged with another firm. The coefficient of Tobins Q is positive indicating that firms with higher growth opportunities are more likely to become a merger target, but with only weak statistical significance. Turnover by Volume has a negative coefficient and is significant at the 1% level. Overall, the survival analysis confirms all our previous results from the logistic regressions, suggesting that our findings do not depend on the methodology employed.

Model | I | II | III |
---|---|---|---|

Sample | German Prime Standard firms (excl. insolvencies) | ||

Coeff. | Coeff. | Coeff. | |

[t-stat.] | [t-stat.] | [t-stat.] | |

Dependent variable | ‘Going Opaque’ | Down-listing | Merger |

Cox | Cox | Cox | |

Tobins Q (t − 1) | − 0.849*** | − 1.006*** | 0.191* |

[− 3.35] | [− 3.29] | [1.78] | |

Size (t − 1) | − 0.425*** | − 0.598*** | 0.10 |

[− 3.27] | [− 3.48] | [0.50] | |

Return on assets (t − 1) | − 1.605*** | − 1.350*** | − 0.09 |

[− 3.81] | [− 2.79] | [− 0.22] | |

Leverage (t − 1) | 1.00 | 1.00 | − 1.58 |

[1.61] | [1.32] | [− 1.57] | |

Turnover by volume (ln) (t − 1) | − 0.210*** | − 0.210** | − 0.667*** |

[− 2.58] | [− 2.30] | [− 6.90] | |

Equity issuance (t − 1) | − 2.82 | − 2.15 | 2.32 |

[− 1.19] | [− 0.97] | [1.09] | |

Audit fees (ln) (t − 1) | 0.20 | 0.21 | 0.02 |

[1.24] | [1.04] | [0.08] | |

Year FE | No | No | No |

Industry FE | No | No | No |

N | 2502 | 2502 | 2502 |

## 5 Discussion

### 5.1 Hypothesis 1 (market access to capital)

### 5.2 Hypothesis 2 (stock liquidity)

### 5.3 Hypothesis 3 (size of the firm)

### 5.4 Hypothesis 4 (poor performance)

### 5.5 Hypothesis 5 (regulatory costs)

### 5.6 Hypothesis 6 (ownership structure)

### 5.7 Additional test: differential between down-listing and going private

Model | I | II | III | IV | V | VI |
---|---|---|---|---|---|---|

Sample | Down-listings and going privates from the Prime Standard | |||||

Dependent variable | Coeff | Coeff | Coeff | Coeff | Coeff | Coeff |

Down-listing | [t-stat.] | [t-stat.] | [t-stat.] | [t-stat.] | [t-stat.] | [t-stat.] |

Pooled logit | FE logit | |||||

Tobins Q (t − 1) | − 0.390** | − 0.382** | − 0.407** | − 0.369** | − 0.512** | − 1.134*** |

[− 2.26] | [− 2.24] | [− 2.31] | [− 1.97] | [− 1.97] | [− 2.66] | |

Size (t − 1) | − 0.048 | − 0.056 | − 0.038 | − 0.049 | − 0.193 | 0.483 |

[− 0.68] | [− 0.77] | [− 0.53] | [− 0.70] | [− 1.46] | [0.83] | |

Return on assets (t − 1) | − 1.612*** | − 1.712*** | − 1.658*** | − 1.626*** | − 1.686** | − 1.756 |

[− 2.97] | [− 3.07] | [− 3.00] | [− 3.00] | [− 2.22] | [− 1.51] | |

Leverage (t − 1) | 0.27 | 0.155 | 0.281 | 0.277 | − 0.26 | − 1.311 |

[0.44] | [0.24] | [0.45] | [0.45] | [− 0.34] | [− 0.68] | |

Firm age (ln) (t − 1) | 0.167 | 0.181 | ||||

[1.01] | [0.87] | |||||

Turnover by volume (ln) (t − 1) | − 0.116 | − 0.132 | − 0.421** | |||

[− 1.50] | [− 1.39] | [− 2.54] | ||||

Equity issuance (t − 1) | − 0.943 | − 0.495 | − 1.268 | |||

[− 0.48] | [− 0.23] | [− 0.37] | ||||

Audit Fees (ln) (t − 1) | 0.329 | 0.548* | ||||

[1.50] | [1.65] | |||||

Year FE | Yes | Yes | Yes | Yes | Yes | No |

Industry FE | Yes | Yes | Yes | Yes | Yes | No |

N | 964 | 964 | 964 | 964 | 627 | 442 |

## 6 Conclusion

^{22}These observations open interesting avenues for future research on organizing securities markets and market segments as well as on firms’ listing and delisting behavior.