The determinants of involuntary delisting rate in the Egyptian IPO equity market

Abstract

Purpose – The purpose of this paper is to examine the determinants of involuntary delisting rate for the Egyptian initial public offerings (IPOs) issued over the period 1992-2009. Design/methodology/approach – A definition of survival time that considers the date when the new Egyptian listing rules were enforced to track delisting status for each IPO firm for five survival years is relied on. Binary logit regression analysis is used to identify these determinants. Total sample is divided into two subsamples: the first subsample covers the period from 1992 to 2004. It is used to estimate the logit equations and to predict delisting status of firms included in the second subsample, which covers the period from 2005 to 2009. Findings – The probability of involuntary delisting decreases significantly with the increase in firm size, institutional ownership, assets growth rate, operating efficiency, offering size, initial returns and insider ownership. However, it increases significantly in IPO firms with high financial leverage. Based on the estimated logit regression equations, the status of the six firms included in the second subsample are correctly predicted. Practical implications – The results provide several implications for investors, issuing firms and setters of listing rules. Originality/value – This study uses new variables, such as firm type, institutional ownership and listing variables. In addition, several theories are tested and supported.