Journal article
Does a Parent-Subsidiary Structure Enhance Financing Flexibility?
The Journal of finance (New York), Vol.61(3), pp.1337-1360
06/2006
DOI: 10.1111/j.1540-6261.2006.00874.x
Abstract
I examine whether firms exploit a publicly traded parent-subsidiary structure to issue equity of the overvalued firm regardless of which firm needs funds, and whether this conveys opposite information about firm values. Using 90 subsidiary and 37 parent seasoned equity offering (SEO) announcements during 1981-2002, I document negative returns to issuers but insignificant returns to nonissuers in both samples, and insignificant changes in combined firm value and parent's nonsubsidiary equity value in subsidiary SEOs. Firms issue equity to meet their own financing needs. My evidence contrasts with previous studies and suggests that parent-subsidiary structures do not enhance financing flexibility.
Details
- Title: Subtitle
- Does a Parent-Subsidiary Structure Enhance Financing Flexibility?
- Creators
- ANAND M. Vijh - Correspondence address: Tippie College of Business, The University of Iowa. I wish to thank Matt Billett, Jie Cai, and Jon Garfinkel for useful comments. I am very obliged to two anonymous referees, an associate editor, and Robert Stambaugh (the editor) for many comments that substantially improved this paper. Wei Li provided assistance with data collection
- Resource Type
- Journal article
- Publication Details
- The Journal of finance (New York), Vol.61(3), pp.1337-1360
- Publisher
- Blackwell Publishing Inc
- DOI
- 10.1111/j.1540-6261.2006.00874.x
- ISSN
- 0022-1082
- eISSN
- 1540-6261
- Number of pages
- 24
- Language
- English
- Date published
- 06/2006
- Academic Unit
- Finance
- Record Identifier
- 9984380542502771
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