Equity carve-outs, divergence of beliefs and analysts' following

In this paper we estimate the impact of a carve-out on the standard deviation of earning per share (EPS)forecast (divergence of belief) and the number of analysts following the firm, using international data. We were expecting that the standard deviation of EPS forecast will decrease after the carve out as more information will be available to the analysts, once a subsidiary will be partially sold in to the market. But results revealed that the standard deviation of EPS forecast increases rather than decreases. For the number of analysts following the parent, we hypothesized that fewer analysts will be following the parent after the carve-out as some analysts specialized in the subsidiary business may leave the parent and start following the subsidiary. However, the results show that the number of analysts following the parent increases on average after the carve-out and the difference between the number of analysts before and after the event is significant.