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Market Reaction of Industry Competitors to Announcements on Companies' Delisting
This study examines whether delisting generates significant valuation effects on industry rivals, based on the assumption that delisting is not an event for one company and may have an influence on the whole industry. Expected effects are divided into competitive and informational. The informational effects of delisting have negative impact on the stock prices of rival firms, spreading negative information about the industry. The competitive effects, on the contrary, have a positive influence, weakening competition. This paper is interesting both for managers of public companies and ordinary investors. The study is aimed to measure the performance of listed industry rival around delisting dates. The second goal relates to the investigation of competitor reaction to delisting due to bankruptcy. The event study methodology is based on calculation the abnormal returns at delisting announcement / completion dates. The study revealed that competitive effect prevails in the market, the price of the company's shares rises on the announcement / completion dates of the delisting, but returns are much higher at the announcement dates. It is important to note that the bankruptcy delisting does not reduce abnormal returns. Also, it has been detected that the current liquidity ratio has significant effect on the response of industry rivals: the smaller this indicator, the higher the anomalous profitability of the company during the delisting. But the ratio of financial leverage does not affect the company's profit. The study includes three main parts. The first one contains theoretical substantiations of the research question and its hypothesis. The second describes the methodology, after which the third part contains the empirical results. The work consists of 53 pages, 46 bibliographic sources, 3 figures, 11 tables, 3 of which are included in the appendix.