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THE PRICING OF EQUITY CARVE-OUTS DURING THE 1990s

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  • Karen M. Hogan
  • Gerard T. Olson
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    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. 2004 The Southern Finance Association and the Southwestern Finance Association.

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    Bibliographic Info

    Article provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.

    Volume (Year): 27 (2004)
    Issue (Month): 4 ()
    Pages: 521-537

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    Handle: RePEc:bla:jfnres:v:27:y:2004:i:4:p:521-537

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    Cited by:
    1. Desai, Chintal A. & Klock, Mark S. & Mansi, Sattar A., 2011. "On the acquisition of equity carve-outs," Journal of Banking & Finance, Elsevier, vol. 35(12), pages 3432-3449.
    2. Thomas Thompson, 2013. "An examination of ex-ante factors and their influence on equity carve-out long-term performance," Journal of Economics and Finance, Springer, vol. 37(2), pages 159-172, April.

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