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Learning the wealth effects from equity carve-outs

Author

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  • Mashwani, Asad Iqbal
  • Dereeper, Sébastien
  • Dowling, Michael
  • Aziz, Saqib

Abstract

We investigate how the market can provide early signals about the eventual effects of an equity carve-out on the wealth of parent firm shareholders. Using a sample of equity carve-outs from 1985–2015, we show that most wealth information regarding the IPO valuation of a subsidiary is observable in the share returns of the parent firm during the book-building period. Our study therefore adds timing and process understanding to existing studies showing a wealth impact of equity carve-outs on parent company shareholders.

Suggested Citation

  • Mashwani, Asad Iqbal & Dereeper, Sébastien & Dowling, Michael & Aziz, Saqib, 2020. "Learning the wealth effects from equity carve-outs," Finance Research Letters, Elsevier, vol. 33(C).
    • Handle: RePEc:eee:finlet:v:33:y:2020:i:c:s1544612319302788
    DOI: 10.1016/j.frl.2019.05.009
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    References listed on IDEAS

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    1. Chinmoy Ghosh & Milena Petrova & Zhilan Feng & Maneechit Pattanapanchai, 2012. "Does IPO Pricing Reflect Public Information? New Insights from Equity Carve‐Outs," Financial Management, Financial Management Association International, vol. 41(1), pages 1-33, March.
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