This study analyzes how firms choose between a spin-off and an equity carve-out as a way to divest assets. Using a sample of 91 master limited partnerships that were issued to the public, we find that riskier, more leveraged, less profitable firms choose to divest through a spin-off. The spin-off firms are smaller and less profitable then the carve-out firms. This suggests that the choice is affected by a firm's access to the capital market: Greater scrutiny and more stringent disclosure are required in care-outs relative to spin-offs. We do not find support for the hypotheses that management attempts to leave undervalued assets in the hands of current shareholders or that parent organizations' need for cash are the driving motives behind the divestiture choice. Little, if any, support is found for operating efficiencies as a reason for these transactions. Both spin-off and the carve-out firms underperform the market by a wide margin. The spin-off parents experienced significantly poor performance, while carve-out parents' performance was commensurate with their control groups.
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Publisher Info
Article provided by Financial Management Association in its journal Financial Management.
Contact details of provider: Postal: University of South Florida 4202 E. Fowler Ave. COBA #3331 Tampa, FL 33620 Phone: 813-974-2084 Fax: 813-974-3318 Web page: http://www.fma.org/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Courtney Connors).
Related research
Keywords:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)