Working paper
The Market Performance of Tracking Stocks
SSRN
06/27/2000
DOI: 10.2139/ssrn.229549
Abstract
Tracking stocks have been a popular form of equity restructuring in recent years. AT&T, Disney, General Motors, Sprint, US West, and many others have issued tracking stocks. While the positive announcement returns of tracking stocks are well documented, an examination of their post-issue market performance is lacking. This paper examines the post-issue returns and the subsequent restructuring events through December 2000 by using a comprehensive sample of tracking stocks. We document three key results. First, we find that tracking stocks earn significantly negative buy-and-hold excess returns during a three-year period following the issue date. We also find significantly negative returns surrounding the earnings announcements during this period. This evidence contrasts with the post-issue returns of spinoffs, which are known to be positive, and of carveouts, which are known to be insignificant. Second, contrary to a common justification given to adopt tracking stocks, we find that they do not increase the transparency of firm earnings. Third, we find large positive announcement-period returns to events resulting in the elimination of tracking stock structure.
Details
- Title: Subtitle
- The Market Performance of Tracking Stocks
- Creators
- Anand M Vijh - University of IowaMatthew T. Billett - Indiana University
- Resource Type
- Working paper
- Publisher
- SSRN
- DOI
- 10.2139/ssrn.229549
- Number of pages
- 43 pages
- Language
- English
- Date posted
- 06/27/2000
- Academic Unit
- Finance
- Record Identifier
- 9984380628802771
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