How two-stage corporate divestitures impact wealth creation and wealth distribution: The case of the combination carve-out and spin-off.

摘要

This dissertation examines the combination carve-out/spin-off (COSO) process in three topics: wealth transfer, divestiture gains, and investment banker reputation. Each topic is presented in a separate essay.; The first essay evaluates the wealth impact of COSOs on investors from 1981 to 2002. Consistent with existing theory and using daily security prices multi-faceted wealth transfers and wealth creation is shown. Wealth increases for stockholders and fixed income holders with the first announcement of the two-stage combination. In the carveout phase, wealth flows from stockholders to bondholders. This effect reverses in the spin-off stage as wealth flows from fixed income holders to stockholders. Throughout this process fixed income securities (with the exception of one downgrade) maintain their quality rating. In addition, overall risk, as measured by post-event standard deviation, reduces with each stage of the two-stage divestiture.; The second essay examines the influence of increased focus and low insider selling on divestiture gains for stockholders of two-stage COSOs from 1981 to 2002. The use of daily and weekly prices shows that increased focus and/or reduced secondary selling increase carve-out returns. In the spin-off phase, an implied when-issued premium (IWIP) is developed. Both IWIPs and when-issued premiums (WIPs) result in positive parent and negative subsidiary premiums. Also, subsidiaries show positive ex-date returns that support a clientele effect.; The third essay determines whether investment banker reputation impacts the initial period returns of COSOs. All prior literature regarding investment banker reputation is based on single-stage events (IPOs). Underwriters for all completed COSOs from 1981 to 2002 retain their reputation in contrast with the single-stage findings of Carter et al. (2002) that investment bankers redeemed (cashed-in) their reputation. Also, the Carter et al. (2002) reputation factors dominate the Loughran and Ritter (2002) reputation factors.