Jake Zheng, “Market-Tier Transitions: Determinants of Successful Post-Delisting Reintegration in U.S. Equity Platforms”
Mentor: Ioannis Floros, Business, Business (Sheldon B. Lubar School of)
Oral Presentation: 10:30am Union E250
A sample of [X] firms delisted from primary U.S. stock exchanges (NYSE & NASDAQ) between 1996 and 2024. [X%] regain primary exchange status with an average duration of [Z] months, while [Y%] of these firms stagnate and permanently exit public equity markets. This research concentrates on firms transitioning to the Over-the-Counter (OTC) Markets—a platform frequently associated with reduced liquidity and visibility, fraudulent activity, and limited capital-raising viability. The analysis leverages a holistic framework to investigate the incentives of OTC downgrading and isolate attributes separating firms that successfully reintegrate into primary exchanges. The 2007–2010 introduction of OTC disclosure tiers further contextualizes the investigation, standardizing disclosure requirements across trading venues. The longitudinal sample spans multiple years before and after the regulatory shift, enabling an assessment of the reforms’ causal impact on firm transparency. For firms quoted on the OTC Markets, four key determinants influence a successful firm’s uplisting into primary exchanges: (1) operating performance, (2) governance quality, (3) ownership concentration, and (4) type of capital raising event. Findings seek to delineate firm-level characteristics, such as governance reforms or retained institutional ownership, that facilitate transitions from quasi-public (OTC) to fully public exchange status (“Success Stories”). Recent regulatory developments—including four pending Securities and Exchange Commission (SEC) applications for new exchange licenses and the proposed Main Street Growth Act in Congress—add relevance to the study, ultimately seeking to address funding disparities for small-cap enterprises. These empirical implications offer multidimensional purposes: a functional perspective for firms seeking efficient reintegration into liquid capital markets and expounded stakeholders with criteria to evaluate market-tier transitions.