IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Second-stage events and bondholder wealth

  • Thomas H. Thompson
  • Vince Apilado
Registered author(s):

    Purpose – The purpose of this paper is to provide a comprehensive initial evaluation of the wealth transfer hypothesis as applied to the second-stage events and announcements that follow carve-outs during the period from 1983 to 2004. Design/methodology/approach – Using daily security prices, such combinations are shown to have multi-faceted wealth transfers and wealth creation. Findings – In contrast with the wealth losses found in previous studies, wealth increases are observed for parent stockholders and bondholders in the spin-off announcement and event phases for combination carve-outs and spin-offs. Also, the spin-off is the most prevalent second divestiture choice for parents with traded debt. Originality/value – This study makes several contributions to the literature. First, in contrast with recent wealth transfer studies that use monthly bond returns, daily stock and bond returns are used to examine the wealth effect for parent stockholders and bondholders during the announcement and ex-dates of second-stage events. Second, in contrast with previous studies that found a wealth transfer from bondholders to stockholders in the spin-off phase, statistically significant wealth retention was observed for bondholders and for stockholders at spin-off and other second event announcements. Third, the results reflect that increased collateral from the carve-out phase lessens the potential for bondholder wealth loss in the spin-off phase.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.emeraldinsight.com/journals.htm?issn=0307-4358&volume=36&issue=2&articleid=1838244&show=abstract
    Download Restriction: Cannot be freely downloaded

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Emerald Group Publishing in its journal Managerial Finance.

    Volume (Year): 36 (2010)
    Issue (Month): 2 (February)
    Pages: 103-121

    as
    in new window

    Handle: RePEc:eme:mfipps:v:36:y:2010:i:2:p:103-121
    Contact details of provider: Web page: http://www.emeraldinsight.com

    Order Information: Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
    Web: http://emeraldgrouppublishing.com/products/journals/journals.htm?id=mf Email:


    References listed on IDEAS
    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.:

    as in new window
    1. Amy Dittmar, 2004. "Capital Structure in Corporate Spin-Offs," The Journal of Business, University of Chicago Press, vol. 77(1), pages 9-44, January.
    2. Mulherin, J. Harold & Boone, Audra L., 2000. "Comparing acquisitions and divestitures," Journal of Corporate Finance, Elsevier, vol. 6(2), pages 117-139, July.
    3. Galai, Dan & Masulis, Ronald W., 1976. "The option pricing model and the risk factor of stock," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 53-81.
    4. Thompson, Thomas H. & Apilado, Vince, 2006. "Investment banker reputation and two-stage combination carve-outs and spin-offs," Journal of Banking & Finance, Elsevier, vol. 30(1), pages 85-110, January.
    5. Mikkelson, Wayne H. & Partch, M. Megan, 1986. "Valuation effects of security offerings and the issuance process," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 31-60.
    6. Asquith, Paul & Mullins, David Jr., 1986. "Equity issues and offering dilution," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 61-89.
    7. Audra Boone & David Haushalter & Wayne Mikkelson, 2003. "An Investigation of the Gains from Specialized Equity Claims," Financial Management, Financial Management Association, vol. 32(3), Fall.
    8. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
    9. Schipper, Katherine & Smith, Abbie, 1986. "A comparison of equity carve-outs and seasoned equity offerings : Share price effects and corporate restructuring," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 153-186.
    10. Chris Veld & Yulia V. Veld-Merkoulova, 2008. "An Empirical Analysis of the Stockholder-Bondholder Conflict in Corporate Spin-Offs," Financial Management, Financial Management Association International, vol. 37(1), pages 103-124, 03.
    11. Jeffrey W. Allen & John J. McConnell, 1998. "Equity Carve-Outs and Managerial Discretion," Journal of Finance, American Finance Association, vol. 53(1), pages 163-186, 02.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eme:mfipps:v:36:y:2010:i:2:p:103-121. 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: (Louise Lister)

    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.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.