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mods:
  schema location: http://www.loc.gov/mods/v3 http://www.loc.gov/standards/mods/v3/mods-3-2.xsd
  title info:
    title: Information asymmetry, valuation, and the corporate spin-off decision
  name:
    name part: Krishnaswami, Sudha
    name part: 1965-
    role:
      role term: creator
  type of resource: text
  genre: bibliography
  origin info:
    place:
      place term: xx
    date issued: 1996
    issuance: monographic
  language:
    language term: eng
  physical description:
    form: print
    extent: viii, 68 leaves ; 28 cm.
  abstract: I analyze the information hypothesis to explain why firms divest divisions through spin-offs. A spin-off is a pro-rata distribution of shares of a subsidiary of a firm to the shareholders of the firm. The operations and management of the subsidiary are then separated from those of the parent. The information hypothesis argues that a spin-off improves market valuation of the separated divisions by reducing the information asymmetry about the firm. I construct a theoretical model of information asymmetry between the managers and the outside investors of a multi-division firm, where the investors use a signal extraction rule to estimate the cost and efficiency of the individual divisions from the total cost of the combined firm. I show that the securities issued by the firm, to finance new investments of its high- growth division are undervalued. This undervaluation can be mitigated by dissociating the divisions through a spin-off. Thus, even in the absence of negative synergies, information asymmetry about a firm's operating costs and efficiency is by itself a sufficient motive for firms to engage in spin-offs. Using analysts' earnings forecast errors, the standard deviation of the forecasts, and the fraction of intangible assets of a firm as measures of information asymmetry, I find that sample firms have higher information dissemination problems than their industry and size matched controls. I also find that information problems decrease after the spin-off. The gains around spin-offs are positively related to earnings forecast errors. This relation is more pronounced for firms which spin-off related subsidiaries, i.e., for firms that should have lower negative synergies between divisions. This finding is consistent with the notion that while negative synergies may play a role in explaining spin-off gains, Litigation of information problems is also an important factor. The results are robust to other measures of information asymmetry. Finally, consistent with the pre…
  note: by Sudha Krishnaswami.
  note: Vita.
  note: "Major Subject: Finance".
  note: Issued also on microfiche from University Microfilms Inc.
  note: Includes bibliographical references: pages 63-65.
  note: Ph. D. Texas A&M University 1996.
  subject:
    topic: Major finance
  identifier: 97-01669 UMI
  identifier: http://proxy.library.tamu.edu/login
  related item:
    location:
      url: http://proxy.library.tamu.edu/login
  record info:
    record content source: TXA
    record creation date: 970506
    record change date: 20190325093257.0
    record identifier: in00001353301