 The Choice of Going Public: Spin-offs vs. Carve-outsRoni Michaely and Wayne H. Shaw Financial Management, 1995, vol. 24, issue 3 Abstract: This study analyzes how firms choose between a spin-off and an equity carve-out as a way to divest assets. Using a sample of 91 master limited partnerships that were issued to the public, we find that riskier, more leveraged, less profitable firms choose to divest through a spin-off. The spin-off firms are smaller and less profitable then the carve-out firms. This suggests that the choice is affected by a firm's access to the capital market: Greater scrutiny and more stringent disclosure are required in care-outs relative to spin-offs. We do not find support for the hypotheses that management attempts to leave undervalued assets in the hands of current shareholders or that parent organizations' need for cash are the driving motives behind the divestiture choice. Little, if any, support is found for operating efficiencies as a reason for these transactions. Both spin-off and the carve-out firms underperform the market by a wide margin. The spin-off parents experienced significantly poor performance, while carve-out parents' performance was commensurate with their control groups. Date: 1995 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:fma:fmanag:michaely95 Access Statistics for this article Financial Management is currently edited by Bill Christie More articles in Financial Management from Financial Management Association University of South Florida 4202 E. Fowler Ave. COBA #3331 Tampa, FL 33620. Contact information at EDIRC. |
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