کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
5093287 | 1478438 | 2016 | 23 صفحه PDF | دانلود رایگان |
- Spin-offs enhance information production by institutional investors.
- Institutional trading has predictive power for the “announcement effects” of spin-offs.
- Institutional trading has predictive power for long-run post-spin-off stock returns.
- Institutional trading in the subsidiary equity yields abnormal profits.
We use a large sample of transaction-level institutional trading data to analyze, for the first time in the literature, the role of institutional investors as producers of information around corporate spin-offs. Our results may be summarized as follows. First, there is a significant imbalance in post-spin-off institutional trading between the equity of new parent firms versus subsidiaries, suggesting that spin-offs increase institutional investors' welfare by relaxing a trading constraint. This imbalance in institutional trading is driven by differences in information asymmetry across the two spun-off firm divisions. Second, institutional trading around spin-offs has significant predictive power for the announcement effect of a spin-off and for post-spin-off long-run stock returns. Third, institutional investors are able to realize significant abnormal profits by trading in the subsidiary firm equity in the first quarter post-spin-off. Overall, we show that spin-offs enhance information production by institutional investors, who profit from this enhanced information production.
Journal: Journal of Corporate Finance - Volume 38, June 2016, Pages 54-76