On the publicity of two-stage spin-offs and equity carve-outs

Chahine, Salim and Goergen, Marc ORCID: https://orcid.org/0000-0003-4391-2651 2011. On the publicity of two-stage spin-offs and equity carve-outs. Financial Review 46 (4) , pp. 671-701. 10.1111/j.1540-6288.2011.00316.x

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Abstract

We investigate the effect of pre-offer publicity on ownership, pricing, and aftermarket performance for equity carve-outs (ECOs) and two-stage spin-offs (COSOs). Contrary to ECOs, for COSOs the parent firm's shareholders end up with free shares in the subsidiary. As the value of large share blocks is likely to be negatively affected by the emergence of new blocks after the divestiture, we hypothesize that parent firms undertaking COSOs may conduct more pre-offer publicity to attract more retail investors, keeping outside ownership diffuse and inflating aftermarket performance until the distribution of the free shares. We find empirical support for our hypotheses.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management H Social Sciences > HG Finance
Uncontrolled Keywords:	Two-stage spin-off ; Equity carve-out ; Publicity ; Underpricing ; Trading conditions
Publisher:	Wiley Blackwell
ISSN:	0732-8516
Last Modified:	19 Oct 2022 08:59
URI:	https://orca.cardiff.ac.uk/id/eprint/19662

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