A Comparison of the Information Conveyed by Equity Carve-Outs, Spin-Offs, and Asset Sell-Offs

Posted: 25 Dec 1998

See all articles by Myron B. Slovin

Myron B. Slovin

Louisiana State University, Baton Rouge - Department of Finance; HEC Paris

Marie E. Sushka

Arizona State University

Steven R. Ferraro

Pepperdine University

Date Written: July 1994

Abstract

We examine valuation effects on firms in the same industry as entities that are the subject of carve-outs (initial public offerings of subsidiary equity), spin-offs, and asset sell-offs. Share price reactions for rivals are negative in response to equity carve-outs. In comparison, rival stock prices are positive for spin-offs and normal for asset sell- offs, restructuring actions that do not entail a public offering of equity. Our results suggest that managers conduct equity carve-outs when outside investors are likely to price the new shares higher than managers' perceived value.

JEL Classification: G34

Suggested Citation

Slovin, Myron B. and Sushka, Marie E. and Ferraro, Steven R., A Comparison of the Information Conveyed by Equity Carve-Outs, Spin-Offs, and Asset Sell-Offs (July 1994). Available at SSRN: https://ssrn.com/abstract=5493

Myron B. Slovin

Louisiana State University, Baton Rouge - Department of Finance ( email )

2900 BEC
Baton Rouge, LA 70803
United States
480-820-5949 (Phone)

HEC Paris ( email )

France
33146476045 (Phone)

Marie E. Sushka (Contact Author)

Arizona State University ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States
602-965-3131 (Phone)
602-965-8539 (Fax)

Steven R. Ferraro

Pepperdine University ( email )

24255 Pacific Coast Highway
Malibu, CA 90263
United States

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