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 language | English (US) |
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Pages (from-to) | 255-279 |
Number of pages | 25 |
Journal | Journal of Financial Economics |
Volume | 49 |
Issue number | 2 |
DOIs | |
State | Published - 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