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Organizational Form, Information Collection, and the Value of the Firm

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  • Eitan Goldman

    (Kenan Flagler Business School, University of North Carolina at Chapel Hill)

Abstract

In 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.

Suggested Citation

  • Eitan Goldman, 2005. "Organizational Form, Information Collection, and the Value of the Firm," The Journal of Business, University of Chicago Press, vol. 78(3), pages 817-840, May.
    • Handle: RePEc:ucp:jnlbus:v:78:y:2005:i:3:p:817-840
    DOI: 10.1086/429645
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    Cited by:

    1. Goldstein, Itay & Yang, Liyan, 2019. "Good disclosure, bad disclosure," Journal of Financial Economics, Elsevier, vol. 131(1), pages 118-138.
    2. 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.
    3. Liyan Yang & Itay Goldstein, 2012. "Information Diversity and Market Efficiency Spirals," 2012 Meeting Papers 349, Society for Economic Dynamics.
    4. Xiong, Yan & Yang, Liyan, 2021. "Disclosure, competition, and learning from asset prices," Journal of Economic Theory, Elsevier, vol. 197(C).
    5. Liyan Yang & Itay Goldstein, 2014. "Market Efficiency and Real Efficiency: The Connect and Disconnect via Feedback Effects," 2014 Meeting Papers 154, Society for Economic Dynamics.

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