Research-Thesis: Are bad ESG performers more likely to delist from the stock market?

Abstract

This thesis studies whether bad ESG performers are more likely to delist strategically from the U.S. stock market. The study compares a sample of firms delisted from the AMEX, NASDAQ, and NYSE exchanges, sourced from the CRSP database, against the S&P 1500 index obtained via LSEG. Delisting data are retrieved from CRSP, whereas ESG and financial data are extracted from LSEG. The final dynamic estimation sample covers event years 2016–2024, with firm characteristics measured one year before the delisting outcome. The dependent variable isolates strategic exits from distress or listing rule removals. The baseline evidence shows that weaker ESG performance predicts a higher subsequent probability of strategic delisting. In the preferred dynamic probit model, the ESG coefficient is negative, and the same direction appears in robustness checks. The economic size is small for one ESG point, but it becomes meaningful across realistic ESG differences because strategic delisting is a rare event. Pillar tests show that the governance pillar is the clearest driver, while the environmental and social pillars are weaker. The causal interpretation remains limited since leave-one-out industry ESG diagnostics have a strong first stage, but the control function probit and 2SLS checks do not keep ESG statistically significant. Consequently, the findings offer a predictive rather than causal interpretation, establishing ESG as an observable signal associated with public market exit risk. This thesis contributes to the literature at the intersection of ESG finance and the boundaries between public and private ownership.