Schemes of arrangement and corporate exit: A South African perspective

Abstract

Background: Corporate delistings undermine investor confidence and market stability. In South Africa, schemes of arrangement (SoAs) have emerged as the dominant mechanism for delisting from the Johannesburg Stock Exchange (JSE), raising questions about strategic, governance and economic drivers.
Aim: This study investigates determinants of corporate delisting in South Africa, focusing on firms that exited the JSE through SoAs between 2010 and 2023.
Setting: The research examines 604 companies: 302 delisted firms and 302 matched listed firms by industry and size.
Method: A mixed-methods approach incorporated structured literature review, principal component analysis, qualitative content analysis and multivariate panel probit regression. Data were sourced from Bloomberg and audited financial statements, with the observation period beginning in 2010, aligning with mandatory integrated reporting standards.
Results: Key predictors of delisting include debt structure, cost of capital efficiency, market valuation, board dynamics, ownership diffusion, institutional investor presence, chief executive officer (CEO) qualifications, interest rates and unemployment. Strategic and governance factors were more influential than financial distress indicators.
Conclusion: SoA delisting is primarily driven by strategic repositioning and governance considerations rather than financial failure. The study offers practical insights for corporate leaders, regulators, and investors in developing-economy contexts.
Contribution: This study provides the first comprehensive empirical analysis of delisting determinants in South Africa, addresses an emerging market research gap, identifies SoAs as the dominant JSE delisting mechanism revealing strategic rather than distress-driven motivations, and demonstrates through integrated analysis of financial, governance and macroeconomic variables that non-financial factors – particularly board stability, ownership structure and CEO qualifications – are stronger predictors of SoA delisting than traditional financial distress indicators.