Learning the wealth effects from equity carve-outs

Asad Iqbal Mashwani (1) , Sébastien Dereeper (1, 2) , Michael Dowling (3) , Saqib Aziz (3)

1 SKEMA Business School
2 Université Lille Nord (France)
3 ESC [Rennes] - ESC Rennes School of Business

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.

Mots clés: Equity carve-outs; Divestitures; Event studies; Wealth effects

Domaines: Économie et finance quantitative [q-fin]; Finance [q-fin.GN]

Asad Iqbal Mashwani, Sébastien Dereeper, Michael Dowling, Saqib Aziz. Learning the wealth effects from equity carve-outs. Finance Research Letters, 2020, 33, pp.101191. ⟨10.1016/j.frl.2019.05.009⟩. ⟨hal-03004469⟩