The implications of equity issuance decisions within a parent-subsidiary governance structure

Article Abstract:

We provide evidence about the motivation for a parent-subsidiary governance structure by analyzing valuation effects of seasoned equity offerings by publicly traded affiliated units. Our results support Nanda's (1991) theoretical model which predicts equity offerings convey differential information about subsidiary and parent value. Subsidiary equity issuance has negative valuation effects on issuing subsidiaries and positive effects on parents, while parent equity insurance reduces issuing parent wealth and increases subsidiary wealth. Our evidence suggests that a parent-subsidiary organizational structure enhances corporate financing flexibility and mitigates underinvestment problems identified by Myers and Majluf (1984). There is no evidence of subsidiary wealth expropriation. (Reprinted by permission of the publisher.)

Finance, Subsidiary corporations, Subsidiaries, Holding companies, Corporate governance, Valuation

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Corporate sale-and-leasebacks and shareholder wealth

Article Abstract:

In this paper, we examine the market valuation effects of corporate sale-and-leasebacks. Specifically, we test whether such transactions offer a net benefit to lessees or lessors by evaluating the impact on share prices from announcements of sale-and-leasebacks of major corporate assets. Our evidence indicates that the announcements are associated with positive abnormal returns to lessees. We conclude that this positive market reaction results from an overall reduction in the present value of expected taxes occasioned by the transactions. Our evidence also suggests that the gains from sale-and-leasebacks accrue solely to lessee firms. (Reprinted by permission of the publisher.)

Economic aspects, Prices and rates, Stockholders, Stock-exchange, Stock exchanges, Stock prices, Sale-leaseback transactions, Sale and leaseback

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Methods of payment in asset sales: contracting with equity versus cash

Article Abstract:

A study comparing the payment methods of purchasing intercorporate assets is presented. The study analyzes the benefits of allocating equity for such purchases for both the purchaser as well as the seller, and highlights the disadvantages of paying in cash for purchasing intercorporate assets.

United Kingdom, Acquisitions & mergers, Securities issued, listed, Venture Analysis, Methods, Mergers, acquisitions and divestments, Company acquisition/merger, Securities, Business enterprises, Company securities, Payment

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