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Like father, like son: Who creates listed subsidiaries?

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  • Boulifa, Hichem
  • Uchida, Konari

Abstract

Equity carve-outs and spin-offs generate listed subsidiaries that embrace conflicts of interests between controlling and minority shareholders. We find robust evidence that long-tenure managers tend to conduct these asset divestitures, especially when the divesting firm has a concentrated ownership structure. The result suggests that managers with the opportunity to extract private benefits establish entities that provide such opportunities. Meanwhile, large shareholders prevent managers from conducting these divestitures when they have sufficiently large cash flow rights. We find no evidence that firms launching listed subsidiaries achieve better financial outcomes than asset sell-off firms. Problematic entities in corporate governance further create such entities.

Suggested Citation

  • Boulifa, Hichem & Uchida, Konari, 2022. "Like father, like son: Who creates listed subsidiaries?," Journal of the Japanese and International Economies, Elsevier, vol. 64(C).
  • Handle: RePEc:eee:jjieco:v:64:y:2022:i:c:s0889158322000156
    DOI: 10.1016/j.jjie.2022.101205
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    More about this item

    Keywords

    Asset divestiture; Equity carve-out; Spin-off; CEO tenure; Ownership structure;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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