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Dismantling internal capital markets via spinoff: effects on capital allocation efficiency and firm valuation

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  • McNeil, Chris R.
  • Moore, William T.
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    File URL: http://www.sciencedirect.com/science/article/B6VFK-49D2M0C-1/2/82404d508624cf4f325544cab2af7fbe
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Corporate Finance.

    Volume (Year): 11 (2005)
    Issue (Month): 1-2 (March)
    Pages: 253-275

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    Handle: RePEc:eee:corfin:v:11:y:2005:i:1-2:p:253-275

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    Web page: http://www.elsevier.com/locate/jcorpfin

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    References

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    1. Rajan, Raghuram G & Servaes, Henri & Zingales, Luigi, 1998. "The Cost of Diversity: The Diversification Discount and Inefficient Investment," CEPR Discussion Papers 1801, C.E.P.R. Discussion Papers.
    2. Vojislav Maksimovic & Gordon Phillips, 2002. "Do Conglomerate Firms Allocate Resources Inefficiently Across Industries? Theory and Evidence," Journal of Finance, American Finance Association, vol. 57(2), pages 721-767, 04.
    3. Gertner, Robert H & Scharfstein, David S & Stein, Jeremy C, 1994. "Internal versus External Capital Markets," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 1211-30, November.
    4. Toni M. Whited, 2001. "Is It Inefficient Investment that Causes the Diversification Discount?," Journal of Finance, American Finance Association, vol. 56(5), pages 1667-1691, October.
    5. Jeremy C. Stein, 1995. "Internal Capital Markets and the Competition for Corporate Resources," NBER Working Papers 5101, National Bureau of Economic Research, Inc.
    6. Meyer, Margaret & Milgrom, Paul & Roberts, John, 1992. "Organizational Prospects, Influence Costs, and Ownership Changes," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(1), pages 9-35, Spring.
    7. Boehmer, Ekkehart & Masumeci, Jim & Poulsen, Annette B., 1991. "Event-study methodology under conditions of event-induced variance," Journal of Financial Economics, Elsevier, vol. 30(2), pages 253-272, December.
    8. Billett, Matthew T. & Mauer, David C., 2000. "Diversification and the value of internal capital markets: The case of tracking stock," Journal of Banking & Finance, Elsevier, vol. 24(9), pages 1457-1490, September.
    9. R. Glenn Hubbard & Darius Palia, 1999. "A Reexamination of the Conglomerate Merger Wave in the 1960s: An Internal Capital Markets View," Journal of Finance, American Finance Association, vol. 54(3), pages 1131-1152, 06.
    10. John, Teresa A., 1993. "Optimality of Spin-Offs and Allocation of Debt," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(01), pages 139-160, March.
    11. James G. MacKinnon & Halbert White, 1983. "Some Heteroskedasticity Consistent Covariance Matrix Estimators with Improved Finite Sample Properties," Working Papers 537, Queen's University, Department of Economics.
    12. Hyun-Han Shin & René M. Stulz, 1998. "Are Internal Capital Markets Efficient?," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 531-552, May.
    13. Campa, Jose M. & Kedia, Simi, 2000. "Explaining the diversification discount," IESE Research Papers D/424, IESE Business School.
    14. Mauer, David C. & Lewellen, Wilbur G., 1990. "Securityholder Taxes and Corporate Restructurings," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 25(03), pages 341-360, September.
    15. Mikkelson, Wayne H. & Partch, M. Megan, 1988. "Withdrawn Security Offerings," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(02), pages 119-133, June.
    16. Robert Gertner & Eric Powers & David Scharfstein, 2002. "Learning about Internal Capital Markets from Corporate Spin-offs," Journal of Finance, American Finance Association, vol. 57(6), pages 2479-2506, December.
    17. Bhagat, Sanjai & Marr, M Wayne & Thompson, G Rodney, 1985. " The Rule 415 Experiment: Equity Markets," Journal of Finance, American Finance Association, vol. 40(5), pages 1385-1401, December.
    18. Kee H. Chung & Stephen W. Pruitt, 1994. "A Simple Approximation of Tobin's q," Financial Management, Financial Management Association, vol. 23(3), Fall.
    19. John R. Graham & Michael L. Lemmon & Jack G. Wolf, 2002. "Does Corporate Diversification Destroy Value?," Journal of Finance, American Finance Association, vol. 57(2), pages 695-720, 04.
    20. David S. Scharfstein & Jeremy C. Stein, 1997. "The Dark Side of Internal Capital Markets: Divisional Rent-Seeking and Inefficient Investment," NBER Working Papers 5969, National Bureau of Economic Research, Inc.
    21. Schipper, Katherine & Smith, Abbie, 1983. "Effects of recontracting on shareholder wealth : The case of voluntary spin-offs," Journal of Financial Economics, Elsevier, vol. 12(4), pages 437-467, December.
    22. Corrado, Charles J., 1989. "A nonparametric test for abnormal security-price performance in event studies," Journal of Financial Economics, Elsevier, vol. 23(2), pages 385-395, August.
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    Cited by:
    1. Harris, Oneil & Madura, Jeff, 2010. "Cause and effects of poison pill adoptions by spinoff units," Journal of Economics and Business, Elsevier, vol. 62(4), pages 307-330, July.
    2. Diemo Dietrich, 2006. "Asset Tangibility and Capital Allocation within Multinational Corporations," IWH Discussion Papers 4, Halle Institute for Economic Research.
    3. Harris, Oneil & Madura, Jeff, 2011. "Why are proposed spinoffs withdrawn?," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(1), pages 69-81, February.

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