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Corporate Restructurings: A Comparison of Equity Carve‐outs and Spin‐offs

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  • Kimberley E. Frank
  • J. William Harden

Abstract

In this paper we examine divisive corporate restructurings in which a firm takes a subsidiary public. Using a sample of 64 spin‐off and 76 carve‐out firms during 1991–1997, we find firms carve‐out subsidiaries with higher market demand. These subsidiaries are more frequently in related industries than spin‐offs. The carve‐out firms are also more likely to be cash constrained and have lower marginal tax rates, but are not likely to be considering financial reporting synergies when structuring the divestiture. These results provide evidence that factors impacting the divestiture choice related to Master Limited partnerships, as studied previously, differ when divesting a corporate subsidiary.

Suggested Citation

  • Kimberley E. Frank & J. William Harden, 2001. "Corporate Restructurings: A Comparison of Equity Carve‐outs and Spin‐offs," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 28(3‐4), pages 503-529, April.
    • Handle: RePEc:bla:jbfnac:v:28:y:2001:i:3-4:p:503-529
    DOI: 10.1111/1468-5957.00383
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    Cited by:

    1. Pearce, John A. & Patel, Pankaj C., 2022. "Reaping the financial and strategic benefits of a divestiture by spin-off," Business Horizons, Elsevier, vol. 65(3), pages 291-301.
    2. Nazir Saima & Chisti Khalid, 2023. "Corporate Spin-Offs and Shareholders’ Wealth: A Systematic Review and Future Research Agenda," Acta Universitatis Sapientiae, Economics and Business, Sciendo, vol. 11(1), pages 42-63, October.
    3. Michelle Haynes & Steve Thompson & Mike Wright, 2007. "Executive Remuneration and Corporate Divestment: Motivating Managers to Make Unpalatable Decisions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(5‐6), pages 792-818, June.

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