The authors wish to thank Jeff Allen, Greg Niehaus, and Donghang Zhang for their helpful comments. Any errors remain the responsibility of the authors.
THE PRICING OF EQUITY CARVE-OUTS DURING THE 1990s
Article first published online: 19 OCT 2004
Journal of Financial Research
Volume 27, Issue 4, pages 521–537, December 2004
How to Cite
Hogan, K. M. and Olson, G. T. (2004), THE PRICING OF EQUITY CARVE-OUTS DURING THE 1990s. Journal of Financial Research, 27: 521–537. doi: 10.1111/j.1475-6803.2004.00106.x
- Issue published online: 19 OCT 2004
- Article first published online: 19 OCT 2004
We examine the level of underpricing and characteristics of equity carveouts (ECOs) from 1990 to 1998 (the 1990s) and from 1999 to 2000 (the bubble period). For a sample of 458 ECOs, we find a mean initial return of 8.75% for the 1990s and 47.76% for the bubble period. The results suggest that, similar to other initial public offerings (IPOs), ECOs have been more willing to accept underpricing through time because of an increased importance in analyst coverage and the increased use of spinning, the practice where investment bankers allocate IPOs to high-profile customers to garner potential future business.