Equity carve-outs and managerial discretion

• 成果类型: Article
• 署名作者: Allen, JW; McConnell, JJ
• 署名单位: Southern Methodist University; Purdue University System; Purdue University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/0022-1082.65022
• 发表日期: 1998
• 页码: 163-186
• 关键词: Financial distress; firm performance; stock returns; COMMON-STOCK; corporate; announcements; INFORMATION; OFFERINGS; event

摘要

This study proposes a managerial discretion hypothesis of equity carve-outs in which managers value control over assets and are reluctant to carve out subsidiaries. Thus, managers undertake carve-outs only when the firm is capital constrained. Consistent with this hypothesis, firms that carve out subsidiaries exhibit poor operating performance and high leverage prior to carve-outs. Also consistent with this hypothesis, in carve-outs wherein funds raised are used to pay down debt, the average excess stock return of +6.63 percent is significantly greater than the average excess stock return of -0.01 percent for carve-outs wherein funds are retained for investment purposes.