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- Title
Tracking Stock or Spin-Off? Determinants of Choice.
- Authors
Danielova, Anna N.
- Abstract
I examine the roles of valuable internal capital markets, cross-subsidization, and insider ownership as determinants of choice between tracking stock and spin-offs in corporate equity, restructuring. I show that conglomerates are more likely to choose tracking stock if they want to obtain some of the benefits offered by a spin-off, without loosing the potential for valuable internal capital markets. My results suggest that the market rewards firms with valuable internal capital markets that opt for tracking stock, and penalizes the possibility of consolidated tax treatments. The market also reacts more favorably to unanticipated tracking-stock announcements.
- Subjects
CAPITAL market; TRACKING stock; CORPORATE divestiture; STOCKS (Finance); CORPORATE reorganizations; CONGLOMERATE corporations; BUSINESS enterprises
- Publication
Financial Management (Wiley-Blackwell), 2008, Vol 37, Issue 1, p125
- ISSN
0046-3892
- Publication type
Article
- DOI
10.1111/j.1755-053X.2008.00003.x