Abstract

Since the passage of the Sarbanes–Oxley Act, regulatory compliance costs have been so burdensome for some companies that they have chosen to go dark. Go-dark firms are those that deregister from the Securities and Exchange Commission and delist from the national stock exchange market but remain public on over-the-counter (OTC) markets. This paper covers 402 US firms that went dark between April 5th, 2010 and April 5th, 2014 and finds that firms with higher leverage and audit fees are more likely to go dark, and that registration announcements have negative effects on the firms’ stock price and liquidity employing logit regression and event study methodology. Most importantly, this paper introduces specific titles of the Jumpstart Our Business Startups Act, which might dramatically decrease the number of firms going dark.