Essays on information and valuation issues around equity carve-outs.

摘要

The thesis consists of two chapters. The first chapter is titled Corporate Disclosure, Information Asymmetry and Market Reaction to Equity Carve-outs. In this chapter, I test whether an increase in corporate disclosure following an equity carve-out leads to a reduction in information asymmetry among investors of the parent firm, and whether this reduction is value-enhancing.; I measure information asymmetry by estimating the probability of information-based trading (PIN) using a sequential trade microstructure model developed by Easley, Kiefer, and O'Hara (1996). Consistent with my hypothesis, the results show a significant decline in the average PIN for the sample firms after equity carve-outs. In contrast, there is no significant change in the average PIN for an industry-, size- and exchange-matched control sample of firms. I also find that the decline in PIN is more pronounced when the carve-out is intended to refocus the parent's operations and when no segment disclosures are made by the parent prior to the carve-out. Finally, consistent with the information hypothesis, I find that gains around equity carve-out announcements are positively related to the level of pre-carve-out informed trading.; The second chapter is titled Is There a Market Overreaction in Equity Carve-outs: Evidence in Insider Trading. The equity carve-out literature has shown that, the parent firms could be mispriced or overvalued not only at the beginning of equity carve-outs but long after they are completed. The primary objective of this paper is to reexamine this market anomaly in equity carve-outs, but from a different angle by examining the parent company insider trades. In this paper, I find increased insider sale transactions and decreased insider purchase transactions in the parent shares right after the completion of equity carve-outs. The results also indicate that, it is the sale-side transactions that contribute to the significant positive returns earned by insiders, while, on average, the purchase-side transactions earn negative short- and long-term returns. Overall, the evidence is consistent with the documented evidence that parent companies are overvalued by the market in equity carve-outs, and the market is inefficient in responding to the insider transactions to correct the misvalutaion.