Value Creation from Equity Carve-Outs

Using a large sample of equity carve-out events during the 1980s and 1990s, we find that rivals of carve-out parent firms display negative announcement-period returns. This finding distinguishes the divestiture gains hypothesis from the asymmetric information hypothesis. Additional tests provide fur...

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Bibliographic Details
Published in:Financial management 2002-04, Vol.31 (1), p.83-100
Main Authors: Hulburt, Heather M., Miles, James A., Woolridge, J. Randall
Format: Article
Language:English
Subjects:
Business enterprises
Common stock
Competition
Corporate divestiture
Corporate reorganizations
Divestiture
Equity
Hypotheses
Industry
Information asymmetry
Investments
Management
Market value
Parents & parenting
Practice
Rates of return
Statistical analysis
Statistical median
Stock prices
Stockholders
Studies
Subsidiaries
Subsidiary companies
Subsidiary corporations
Value creation
Working capital
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Summary:Using a large sample of equity carve-out events during the 1980s and 1990s, we find that rivals of carve-out parent firms display negative announcement-period returns. This finding distinguishes the divestiture gains hypothesis from the asymmetric information hypothesis. Additional tests provide further support for the divestiture gains hypothesis. Operating performance improvements for both parents and their carved-out subsidiaries are evident.
ISSN:0046-3892
1755-053X
DOI:10.2307/3666322