Deciphering the Motives for Equity Carve-Outs
AbstractI analyze 181 equity carve-outs to determine whether the transactions are motivated by potential efficiency improvements or by an opportunity to sell overvalued equity. Carve-out operating performance peaks at issue, declining significantly thereafter. Parents sell a greater percentage of shares when subsequent performance is poor. A negative relation also exists between long-term excess returns and the percentage of shares sold. If subsequent performance is correlated with the degree to which parent managers believe carve-out subsidiaries are over- or undervalued, results imply that many carve-outs are conducted, not to improve efficiency, but to sell potentially overvalued equity. 2003 The Southern Finance Association and the Southwestern Finance Association.
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Bibliographic InfoArticle provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.
Volume (Year): 26 (2003)
Issue (Month): 1 ()
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- Perotti, Enrico & Rossetto, Silvia, 2007.
"Unlocking value: Equity carve outs as strategic real options,"
Journal of Corporate Finance,
Elsevier, vol. 13(5), pages 771-792, December.
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- Otsubo, Minoru, 2013. "Value creation from financing in equity carve-outs: Evidence from Japan," Journal of Economics and Business, Elsevier, vol. 68(C), pages 52-69.
- Otsubo, Minoru, 2009. "Gains from equity carve-outs and subsequent events," Journal of Business Research, Elsevier, vol. 62(11), pages 1207-1213, November.
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