Learning about Internal Capital Markets from Corporate Spin-offs
We examine the investment behavior of firms before and after being spun off from their parent companies. Their investment after the spin-off is significantly more sensitive to measures of investment opportunities (e.g., industry Tobin's "Q"or industry investment) than it is before the spin-off. Spin-offs tend to cut investment in low "Q"industries and increase investment in high "Q"industries. These changes are observed primarily in spin-offs of firms in industries unrelated to the parents' industries and in spin-offs where the stock market reacts favorably to the spin-off announcement. Our findings suggest that spin-offs may improve the allocation of capital. Copyright The American Finance Association 2002.
Year of publication: |
2002
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Authors: | Gertner, Robert ; Powers, Eric ; Scharfstein, David |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 57.2002, 6, p. 2479-2506
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Publisher: |
American Finance Association - AFA |
Saved in:
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