A comparison of the information conveyed by equity carve-outs, spin-offs, and asset sell-offs

Myron B. Slovin, Marie Sushka, Steven R. Ferraro

Research output: Contribution to journalArticle

101 Scopus citations

Abstract

We examine valuation effects on firms in the same industry as entities that are the subject of carve-outs (initial public offerings of subsidiary equity), spin-offs, and asset sell-offs. Share price reactions for rivals are negative in response to equity carve-outs. In comparison, rival stock returns are positive for spin-offs and normal for asset sell-offs, restructuring actions that do not entail a public offering of equity. Our results suggest managers conduct equity carve-outs when outside investors are likely to price the new shares higher than managers' perceived value.

Original languageEnglish (US)
Pages (from-to)89-104
Number of pages16
JournalJournal of Financial Economics
Volume37
Issue number1
DOIs
StatePublished - Jan 1995

Keywords

  • Divestitures
  • Equity carve-outs
  • Restructuring
  • Sell-offs
  • Spin-offs

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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