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THE PRICING OF EQUITY CARVE-OUTS DURING THE 1990s

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  • Karen M. Hogan
  • Gerard T. Olson

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.

Suggested Citation

  • Karen M. Hogan & Gerard T. Olson, 2004. "THE PRICING OF EQUITY CARVE-OUTS DURING THE 1990s," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 27(4), pages 521-537.
  • Handle: RePEc:bla:jfnres:v:27:y:2004:i:4:p:521-537
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    Cited by:

    1. Chahine, Salim & Mansi, Sattar & Mazboudi, Mohamad, 2015. "Media news and earnings management prior to equity offerings," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 177-195.
    2. 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.
    3. 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;Academy of Economics and Finance, vol. 37(2), pages 159-172, April.
    4. Thomas H. Thompson, 2016. "Underpricing, partial price adjustments, and equity carve-outs," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 40(2), pages 345-366, April.

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