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The reaction of security prices to tracking stock announcements

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  • John Elder
  • Peter Westra

Abstract

This paper provides some empirical evidence on a relatively new and increasingly prevalent form of equity restructuring called tracking stock. We identify the effects associated with tracking stock announcements by excluding from our sample those announcement events that include other significant news announcements on the event date, such as announcements of acquisitions and earnings. For the 35 announcement events that fit this criteria, we find a mean abnormal return of over 3 percent in the two-day period surrounding the announced proposal to issue a tracking stock, with 30 of the 35 firms in the sample earning positive abnormal returns. Copyright Springer 2000

Suggested Citation

  • John Elder & Peter Westra, 2000. "The reaction of security prices to tracking stock announcements," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 24(1), pages 36-55, March.
    • Handle: RePEc:spr:jecfin:v:24:y:2000:i:1:p:36-55
    DOI: 10.1007/BF02759694
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    References listed on IDEAS

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    Cited by:

    1. Nippel, Peter & Mertens, Raphael, 2002. "Tracking Stocks: Ein Beispiel für Risiken und Nebenwirkungen komplexer Strukturen in der Unternehmensfinanzierung," Manuskripte aus den Instituten für Betriebswirtschaftslehre der Universität Kiel 567, Christian-Albrechts-Universität zu Kiel, Institut für Betriebswirtschaftslehre.
    2. Wei He & Tarun Mukherjee & Peihwang Wei, 2009. "Agency problems in tracking stock and minority carve-out decisions: Explaining the discrepancy in short- and long-term performances," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 33(1), pages 27-42, January.
    3. Anna N. Danielova, 2008. "Tracking Stock or Spin‐Off? Determinants of Choice," Financial Management, Financial Management Association International, vol. 37(1), pages 125-139, March.
    4. Sabine Langner, 2004. "Tracking Stocks," Schmalenbach Journal of Business Research, Springer, vol. 56(7), pages 666-684, November.
    5. Sylwia Lorenc & Tomasz Leśniak & Arkadiusz Kustra & Maria Sierpińska, 2023. "Evolution of Business Models of Mining and Energy Sector Companies according to Current Market Trends," Energies, MDPI, vol. 16(13), pages 1-21, July.

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