The effects of tracking stock issuances on operating performance, shareholder wealth, and the informativeness of accounting fundamentals.

摘要

Firms issuing tracking stock cite three primary motivations for doing so: improved operating performance, enhanced shareholder wealth, and a better ability to value the firm. While tracking stocks receive both favorable reviews along with warnings for investors and increasing skepticism in the financial press, existing empirical studies document positive market reactions to their announcements. This dissertation examines if the motivations offered by firms for issuing tracking stocks are actually realized, concluding that operating performance does not improve and that accounting fundamentals do not become more price informative after tracking stock issuances. This dissertation does find some evidence that shareholders benefit from improvements in clientele effects and transparency effects. Operating performance is evaluated by comparing issuing firm return on equity decompositions before and after issuance and by examining the differences between issuing firm operating performance and tracked division operating performance. Shareholder wealth is evaluated by comparing market adjusted yearly returns to shareholders before and after issuance, and by examining the factors expected to influence shareholder wealth. The effect of tracking stock issuances on the informativeness of accounting fundamentals is evaluated by comparing the explanatory power of accounting earnings and book value in market value regressions before and after issuance.