Research Summary
Research Summary
Survivorship and the Economic Grim Reaper
Description
Robert E. Kennedy and George P. Baker III are studying the long-term equity market performance of firms that are no longer public entities. Firms are delisted for a variety of reasons, including liquidation, merger, and leveraged buyout. Although the short-term returns associated with delisting vary widely - troubled firms tend to end their lives with low returns, takeover targets, with high returns - over the long term, most delisted firms appear to significantly underperform. Kennedy and Baker are exploring this long-term pattern in an effort to better understand how the capitalist system "weeds out" poorly performing firms.