On the Good News in Equity Carve-Outs

Vikram Nanda

Journal of Finance, 1991, vol. 46, issue 5, 1717-37

Abstract: The announcement of the sale of equity in a wholly owned subsidiary of a corporation is received by the market as good news about the value of the existing equity in the parent corporation. This is in stark contrast to announcements of other forms of public equity financing . The authors show that the apparent inconsistency between the market response to equity carve-out announcements and other forms of equity financing can be easily understood in the Myers and Majluf (1984) framework. It is shown that firms that resort to an equity carve-out will be firms that, on average, are being undervalued by the market. Copyright 1991 by American Finance Association.

Date: 1991
References: Add references at CitEc
Citations: View citations in EconPapers (38)

Downloads: (external link)
http://links.jstor.org/sici?sici=0022-1082%2819911 ... O%3B2-G&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:46:y:1991:i:5:p:1717-37

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().