Using a sample of equity carve-outs offered over the period of 1985-2015, we find out the time at which the market can know the effects of an equity carve-out on the wealth of existing shareholders. In equity carve-outs, the parent holds a significant fraction of the carved-out subsidiary....

The process firms use to choose their capital structures is explained by different corporate finance theories in which trade-off and pecking order are the two most popular hypotheses. Testing these two models will help to determine whether a target debt ratio exists, and if so, how rapidly firms...