Abstract

Between 1999 and 2005, the EU adopted the Financial Services Action Plan (FSAP) to reshape its financial markets. In this paper, we examine the firm-level effect of this major regulatory shock. In pre/post-2005 analyses, we compare the probabilities of companies voluntarily or involuntarily delisting in seven European economies that strongly commit to implementing regulations and seven economies that apply regulations more leniently. Our findings indicate an increased probability of delisting after 2005, primarily due to involuntary delistings in economies that implement regulations strictly. Furthermore, we examine a core element of the FSAP, the International Financial Reporting Standards (IFRS) mandate, which aimed to improve public firms’ reporting and disclosure quality. IFRS continued to undergo rapid changes after 2005, and we document an incremental association between delisting and the post-2005 changes. Our results highlight the firm-level consequences of the FSAP across jurisdictions with varying institutional environments.