Corporate Governance and Involuntary Delisting: Empirical Evidence

This study aims to investigate the change in corporate governance structure of a firm in China as it approaches involuntary delisting. To this end, we try to identify corporate governance characteristics that have the most significant impact on probability of involuntary delisting at three years prior to the event, two years prior to the event, and one year prior to the event. The corporate governance characteristics examined in this study are board characteristics (board activity, board size, board independence, and presence of audit committee) and ownership characteristics (shareholder activism, ownership concentration, and insider ownership). We use logistic regression analysis on a match pair sample of surviving and delisting firms and evaluate how the governance characteristics vary over time for the two sets of firms. Our results confirm a widening gap between governance structures of delisting and surviving firms as the former approach delisting event