IDEAS home Printed from https://ideas.repec.org/a/bla/jfnres/v28y2005i2p197-213.html
   My bibliography  Save this article

Do Tracking Stocks Reduce Information Asymmetries? An Analysis Of Liquidity And Adverse Selection

Author

Listed:
  • John Elder
  • Pankaj K. Jain
  • Jang-Chul Kim

Abstract

A firm's announcement that it intends to restructure based on tracking stock is usually associated with a positive stock price reaction, at least in the short run. Typically, this reaction is attributed to expected reductions in a diversification discount, through reduced agency costs or information asymmetries. We reinvestigate this latter hypothesis by focusing on the liquidity provided by market makers before and after a firm issues a tracking stock. Our results suggest that such restructurings are not effective at reducing information asymmetries. Rather, firms that issue tracking stocks exhibit less liquidity and greater adverse selection than comparable control firms. 2005 The Southern Finance Association and the Southwestern Finance Association.

Suggested Citation

  • John Elder & Pankaj K. Jain & Jang-Chul Kim, 2005. "Do Tracking Stocks Reduce Information Asymmetries? An Analysis Of Liquidity And Adverse Selection," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 28(2), pages 197-213.
  • Handle: RePEc:bla:jfnres:v:28:y:2005:i:2:p:197-213
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1475-6803.2005.00121.x
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wei He & Tarun Mukherjee & Peihwang Wei, 2009. "Agency problems in tracking stock and minority carve-out decisions: Explaining the discrepancy in short- and long-term performances," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 33(1), pages 27-42, January.
    2. Rudy De Winne & Christophe Majois, 2003. "A comparison of alternative spread décomposition models on Euronext Brussels," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 46(4), pages 91-136.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jfnres:v:28:y:2005:i:2:p:197-213. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/sfaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.