The Pricing of Equity Carve-Outs During the 1990s

Posted: 14 Mar 2004

See all articles by Karen M. Hogan

Karen M. Hogan

St. Joseph's University

Gerard T. Olson

Villanova University - School of Business

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

Hogan, Karen M. and Olson, Gerard T., The Pricing of Equity Carve-Outs During the 1990s. Available at SSRN: https://ssrn.com/abstract=516342

Karen M. Hogan (Contact Author)

St. Joseph's University ( email )

5600 City Avenue
Philadelphia, PA 1913-1395
United States
610-660-1671 (Phone)
610-660-1986 (Fax)

Gerard T. Olson

Villanova University - School of Business ( email )

800 Lancaster Avenue
Villanova, PA 19085-1678
United States
610-519-4377 (Phone)

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