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
Year of publication: |
[2003]
|
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Authors: | Gertner, Robert H. |
Other Persons: | Powers, Eric A. (contributor) ; Scharfstein, David S. (contributor) |
Publisher: |
[2003]: [S.l.] : SSRN |
Description of contents: | Abstract [papers.ssrn.com] |
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