Get access

THE WEALTH EFFECTS OF TRACKING STOCK RESTRUCTURINGS

Authors


  • This article has benefited from comments of seminar participants at the Case Western Reserve University, the Financial Management Association, the University of Missouri, and the University of Oklahoma. We wish to thank Jon Garfinkel, Ingo Natusch, and an anonymous referee for helpful suggestions.

Abstract

We provide a comprehensive examination of the post-issue wealth effects of 29 completed tracking stock restructurings. We document that for the parent stock and for the combined firm, tracking stock restructurings lead to insignificant long-term excess returns. However, we find that shareholders of tracking stocks realize significant post-issue wealth losses. Unlike spin-offs and carve-outs, announcements of tracking stock restructurings are preceded by negative one-year excess returns, and unlike the positive post-issue long-term excess returns to spin-off stocks and the insignificant long-term excess returns to carve-out stocks, tracking stocks experience negative long-term excess returns.

Ancillary