Market response to stock exchange listing deficiency notices: Evidence from Nasdaq

Abstract

The Securities and Exchange Commission (SEC) requires Form 8-K filings of quantitative deficiency notices. This study examines whether investors use these 8-K filings in a way that influences their investment decisions. Using abnormal returns, I show that investors react negatively to these 8-K filings. Reactions to filings are less negative for firms with more institutional investors. I also find that firms with more analyst following experience less negative market reaction, supporting the notion that 8-K filings are more informative when the firm's information environment is poor. I further document that equity and multiple deficiency notice filings elicit more negative reactions and are also more likely to result in actual delisting compared to bid price deficiency notice filings. Together, these results help us understand investors' perceptions and delisting risks associated with quantitative deficiency notice filings.