JSE delisting rate nearly double global average for over 20 years, new study shows

A lot has written about what analysts say is the worrying the trend of delisting on the Johannesburg Stock Exchange (JSE).

A new study has found that the JSE exhibited nearly twice the global delisting rate of 4.1% at a rate of 7.8% during the period from 1993 to 2015.

The authors highlight that, for firm-level econometric analysis, a more comprehensive dataset covering 2002 – 2024 is employed.

However, "a central descriptive finding is that, over the period 1993 – 2015, the JSE exhibited higher average annual delisting rates and persistently negative net listings relative to most global peers."

Stephen Grootes interviews Haroon Bhorat, professor of economics at the University of Cape Town (UCT) and co-author of the study, titled Vanishing Acts:An Econometric Exploration of Firm Delistings in South Africa.

Professor Bhorat is careful to put their data into context, specifying that they ran comparisons of what they call net new listings as a share of market cap.

"We control for the size of company as well as new listings, so it is not just a simple count of delistings."

A key finding of the research is that, in the post-2005 period, the performance of the JSE is actually relatively similar to a global sample of exchanges, he says.

Prof. Bhorat highlights the distinction between pre- and post-2005, which he characterises as a time of reorganisation of the JSE after the democratic elections of 1994.

"In the post-94 period we were now a normal, functioning small open economy and firms started to reorganise. It is also partly the idea that you can seek capital elsewhere now, outside of the JSE."

"Once those 'systemic forces' worked their way through, by the mid-2000s, you see a relatively similar pattern of delistings on the JSE compared to other exchanges. However, we also find market concentration on the JSE - concentration levels have risen, so you find that we call the index of concentration on the JSE has actually gone up."

What they need to study more closely going forward, Bhorat says, is the impact of new, simplified requirements from the JSE to ease the listing burden on smaller firms.

He also notes that, in terms of macroeconomics and geopolitics, there are of course factors beyond the control of the JSE.

"Think of US GDP or South African GDP rates, business confidence, policy uncertainty... All of those do feed into the propensity to delist."

Scroll up to the audio player to hear more detail from Prof. Haroon Bhorat