Learning the wealth effects from equity carve-outs
Asad Iqbal Mashwani
, , Michael DOWLING
, Saqib AZIZ
2020, Finance Research Letters, 33, pp.101191
Abstract
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.