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Is There Shareholder Expropriation in the United States? An Analysis of Publicly Traded Subsidiaries

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  • Atanasov, Vladimir
  • Boone, Audra
  • Haushalter, David

Abstract

This paper examines the relation between the performance and valuations of publicly traded subsidiaries in the United States and the ownership stake of their parent companies. Cross-sectional and time-series tests demonstrate that subsidiaries of parents that own a substantial minority stake exhibit negative peer-adjusted operating performance and are valued at a 23% median discount relative to peers. In contrast, majority-owned and fully divested subsidiaries show no abnormal performance or valuations. The results of our study indicate that the association between parent ownership and subsidiary performance is nonlinear and that some parents behave opportunistically toward their publicly traded subsidiaries.

Suggested Citation

  • Atanasov, Vladimir & Boone, Audra & Haushalter, David, 2010. "Is There Shareholder Expropriation in the United States? An Analysis of Publicly Traded Subsidiaries," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 45(01), pages 1-26, February.
  • Handle: RePEc:cup:jfinqa:v:45:y:2010:i:01:p:1-26_00
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    Cited by:

    1. de La Bruslerie, Hubert, 2013. "Equal opportunity rule vs. market rule in transfer of control: How can private benefits help to provide an answer?," Journal of Corporate Finance, Elsevier, vol. 23(C), pages 88-107.
    2. Xingqiang Du, 2015. "Does Confucianism Reduce Minority Shareholder Expropriation? Evidence from China," Journal of Business Ethics, Springer, vol. 132(4), pages 661-716, December.
    3. 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.
    4. Konstantinos Konstantaras, & Vasilios Sogiakas, 2014. "The role of convenience yield in going-private transactions," CFI Discussion Papers 1401, Centre for Finance and Investment, Heriot Watt University.
    5. Xingqiang Du, 2014. "Does Religion Mitigate Tunneling? Evidence from Chinese Buddhism," Journal of Business Ethics, Springer, vol. 125(2), pages 299-327, December.

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