The Impact of COVID-19 on Voluntary Delisting Trends in India

International Journal of Economics and Management Studies

© 2024 by SSRG - IJEMS Journal

Volume 11 Issue 10

Year of Publication : 2024

Authors : Shashwat Jain

10.14445/23939125/IJEMS-V11I10P102

How to Cite?

Shashwat Jain, "The Impact of COVID-19 on Voluntary Delisting Trends in India," SSRG International Journal of Economics and Management Studies, vol. 11,  no. 10, pp. 13-20, 2024. Crossref, https://doi.org/10.14445/23939125/IJEMS-V11I10P102

Abstract:

Delisting involves the removal of a company's securities from a stock exchange, which may be voluntary—initiated by the company itself—or compulsory, enforced as a penalty for non-compliance with regulatory requirements. Voluntary delisting can result from factors such as insufficient market capitalization, financial distress, or failure to meet exchange regulations. While several studies have investigated the drivers of voluntary delisting on U.S. exchanges, such as NASDAQ and NYSE, and across 26 countries from 1990 to 2020, there is a lack of research focusing on the impact of the COVID-19 pandemic on delisting trends in the Indian market. This study aims to analyze the effect of the COVID-19 pandemic on voluntary delisting trends among companies listed on the National Stock Exchange (NSE) in India during the financial years 2018 to 2024. Key variables examined include the age and sector of firms, alongside financial metrics such as profit after tax, total assets, and cash flow, to measure the impact of profitability and liquidity. The analysis indicates that the pandemic significantly increased voluntary delisting, particularly among younger firms and those in the textile, steel and pharmaceutical sectors. Moreover, several young pharmaceutical companies also opted for delisting due to their inability to meet the sudden surge in product demand. The financial metrics showed that most companies with low profitability and liquidity chose voluntary delisting. There was one key exception in the form of the Dewan Housing and Finance Corporation, which had extremely high total assets but chose to voluntarily delist as it was acquired by the Piramal Group after accruing debts amounting to over ₹900000 million. These findings have important implications for policymakers and financial regulators in identifying vulnerable firms during systemic economic disruptions and developing safeguards. Furthermore, firms can use these insights to recognize delisting risks and implement strategies to ensure continued listing during economic upheavals.

Keywords:

COVID-19, Indian Stock Market, Systemic Risk, Voluntary Delisting.

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