Organizational Form, Information Collection, and the Value of the Firm
AbstractIn a multidivision firm, does the market collect less value-relevant information when the divisions are treated as a unit rather than when each division trades as a separate firm? We find that organizational form has a nontrivial impact on information collection. In particular, we find that a spin-off may lead to either an increase or a decrease in aggregate information collection. We further explore how this result affects firm value and the conditions for a value-increasing spin-off. Our results provide a novel rationale for why firms may choose to spin off a division or issue a tracking stock.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 78 (2005)
Issue (Month): 3 (May)
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Web page: http://www.journals.uchicago.edu/JB/
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- Liyan Yang & Itay Goldstein, 2012. "Information Diversity and Market Efficiency Spirals," 2012 Meeting Papers 349, Society for Economic Dynamics.
- Chemmanur, Thomas J. & Liu, Mark H., 2011. "Institutional trading, information production, and the choice between spin-offs, carve-outs, and tracking stock issues," Journal of Corporate Finance, Elsevier, vol. 17(1), pages 62-82, February.
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