The economics of parent-subsidiary mergers: An empirical analysis

Myron B. Slovin, Marie Sushka

Research output: Contribution to journalArticle

19 Scopus citations

Abstract

We examine parent-subsidiary mergers, transactions that do not entail arm's length bargaining or a change in control. These mergers are typically followed by considerable restructuring of subsidiaries. Minority and parent returns are not significantly different from returns at third party buyouts of parent-controlled subsidiaries, transactions that entail arm's length negotiations and a change in control. Buyer returns are negative, consistent with overbidding. We conclude that parent-subsidiary mergers facilitate corporate restructuring, foster the reallocation of resources toward higher valued uses, and increase value for both parent and subsidiary.

Original languageEnglish (US)
Pages (from-to)255-279
Number of pages25
JournalJournal of Financial Economics
Volume49
Issue number2
DOIs
StatePublished - Aug 1 1998

Keywords

  • G32
  • G34
  • Majority control
  • Minority shareholders
  • Parent-subsidiary mergers

ASJC Scopus subject areas

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

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