We are grateful to EM Lyon for their support in providing access to data from Factiva.
On the Publicity of Two-Stage Spin-Offs and Equity Carve-Outs
Article first published online: 5 OCT 2011
© 2011, The Eastern Finance Association
Volume 46, Issue 4, pages 671–701, November 2011
How to Cite
Chahine, S. and Goergen, M. (2011), On the Publicity of Two-Stage Spin-Offs and Equity Carve-Outs. Financial Review, 46: 671–701. doi: 10.1111/j.1540-6288.2011.00316.x
- Issue published online: 5 OCT 2011
- Article first published online: 5 OCT 2011
- two-stage spin-off;
- equity carve-out;
- trading conditions
We investigate the effect of pre-offer publicity on ownership, pricing, and aftermarket performance for equity carve-outs (ECOs) and two-stage spin-offs (COSOs). Contrary to ECOs, for COSOs the parent firm's shareholders end up with free shares in the subsidiary. As the value of large share blocks is likely to be negatively affected by the emergence of new blocks after the divestiture, we hypothesize that parent firms undertaking COSOs may conduct more pre-offer publicity to attract more retail investors, keeping outside ownership diffuse and inflating aftermarket performance until the distribution of the free shares. We find empirical support for our hypotheses.