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Ex-date variables and DIPO parent returns

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  • Thomas H. Thompson

    (University of Texas at Arlington)

Abstract

We examine the extent to which divestiture IPO (DIPO) parent announcement and ex-date market-adjusted returns reflect public information for 57 DIPO parents for the period 1988–2020. We evaluate four hypotheses related to DIPO parents: partial price adjustment, overhang, managerial discretionary, and leaning against the wind. To test these hypotheses we use four primary variables: the percentage of the subsidiary retained by the parent, filing range adjustments, the percentage of the offering used to pay dividends to or repay parents (PFUND), and the CBOE Volatility Index (VIX) to predict initial returns. We show that 9.59%-27.91% of the variation in market-adjusted DIPO parent returns can be predicted using public information known prior to the offer date.

Suggested Citation

  • Thomas H. Thompson, 2022. "Ex-date variables and DIPO parent returns," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 46(3), pages 553-565, July.
    • Handle: RePEc:spr:jecfin:v:46:y:2022:i:3:d:10.1007_s12197-022-09585-9
    DOI: 10.1007/s12197-022-09585-9
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    References listed on IDEAS

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    More about this item

    Keywords

    Divestitures;

    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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