Ex-date variables and DIPO parent returns

Thomas H. Thompson ()
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Thomas H. Thompson: University of Texas at Arlington

Journal of Economics and Finance, 2022, vol. 46, issue 3, No 6, 553-565

Abstract: Abstract We examine the extent to which divestiture IPO (DIPO) parent announcement and ex-date market-adjusted returns reflect public information for 57 DIPO parents for the period 1988–2020. We evaluate four hypotheses related to DIPO parents: partial price adjustment, overhang, managerial discretionary, and leaning against the wind. To test these hypotheses we use four primary variables: the percentage of the subsidiary retained by the parent, filing range adjustments, the percentage of the offering used to pay dividends to or repay parents (PFUND), and the CBOE Volatility Index (VIX) to predict initial returns. We show that 9.59%-27.91% of the variation in market-adjusted DIPO parent returns can be predicted using public information known prior to the offer date.

Keywords: Divestitures (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s12197-022-09585-9

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