Can DuPont Analysis Predict Voluntary Delisting from Stock Exchange? Evidence from Pakistan

Abstract

This study explores whether voluntary delisting of companies from stock exchanges can be predicted by the DuPont Model. ROE (Return on Equity), NPM (Net Profit Margin), ATO (Assets Turnover) and LM (Leverage Multiplier) of 13 voluntarily delisted firms from Karachi Stock Exchange were compared with same ratios of respective sectors for 6 years preceding the delistment year by applying t-test. Difference of means of DuPont ratios between voluntarily delisted firms and their respective sectors were not found statistically significant. Thus, ROE, NPM, ATO and LM, which are the measures of profitability, asset utilization (efficiency) and leverage respectively, are not the significant predictors of voluntary delisting decisions in Pakistan. To the best of researchers knowledge, this study is first attempt to differentiate between voluntarily delisted and listed companies on the basis of DuPont Model.