 Gains from equity carve-outs and subsequent eventsMinoru Otsubo Journal of Business Research, 2009, vol. 62, issue 11, 1207-1213 Abstract: This study examines why the stock price of a parent company reacts positively to the announcement of a carve-out. The study also focuses on the gains associated with the combinations of carve-outs and each of four subsequent events: M&A activity, secondary offerings, spin-offs, and reacquisitions. The study finds that these secondary events are useful in evaluating the potential market reactions to carve-out announcements. By analyzing 201 carve-outs conducted by nonfinancial firms in the U.S., this study finds that the stock market reacts favorably toward the stock of a parent company when the parent-subsidiary relationship is preserved after a carve-out. However, this reaction changes when secondary events occur. To be precise, the market does not have a significantly positive reaction to the parent company's stock when the announcement concerns only M&A. These results indicate that the stock market expects secondary events when companies announce carve-outs and that it evaluates the combination of events upon the announcement of the carve-outs. In addition, this study finds that the market expects M&A as a secondary event. Keywords: Equity; carve-outs; M&; A; Spin-offs; Corporate; restructuring (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:62:y:2009:i:11:p:1207-1213 Access Statistics for this article Journal of Business Research is currently edited by A. G. Woodside More articles in Journal of Business Research from Elsevier |
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