The Pricing of Equity Carve-Outs During the 1990s
Posted: 14 Mar 2004
Abstract
We examine the level of underpricing and characteristics of equity carveouts (ECOs) from 1990 to 1998 (the 1990s) and from 1999 to 2000 (the bubble period). For a sample of 458 ECOs, we find a mean initial return of 8.75% for the 1990s and 47.76% for the bubble period. The results suggest that, similar to other initial public offerings (IPOs), ECOs have been more willing to accept underpricing through time because of an increased importance in analyst coverage and the increased use of spinning, the practice where investment bankers allocate IPOs to high profile customers to garner potential future business.
JEL Classification: G12, G34
Suggested Citation: Suggested Citation
Hogan, Karen M. and Olson, Gerard T., The Pricing of Equity Carve-Outs During the 1990s. Available at SSRN: https://ssrn.com/abstract=516342
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