Abstract
While there has been done a lot of empirical research on IPO performance in general only Prezas et al. [1] focus on equity carve-outs (ECOs) in comparison to common IPOs from an investor’s point of view. ECOs are an often applied divestment alternative used by technology companies to refocus their core businesses. Our note is claiming to extent this distinct literature in two ways. Firstly, we add new insight from a European market, namely Germany, and secondly, we apply a wider methodological spectrum to compare IPOs and ECOs. We find that controlling for the specific return characteristics of IPOs there remain hardly any sig-nificant performance divergences between the two samples.
Highlights
According to Schipper/Smith [2], an equity carve-out (ECO) is defined by a company selling stock in a subsidiary via an initial public offering (IPO)
While there has been done a lot of empirical research on IPO performance in general only Prezas et al [1] focus on equity carve-outs (ECOs) in comparison to common IPOs from an investor’s point of view
Prezas et al [1] find a significant three year underperformance of equity carve-outs compared to common IPOs
Summary
According to Schipper/Smith [2], an equity carve-out (ECO) is defined by a company selling stock in a subsidiary via an initial public offering (IPO). Vijh [3] who indirectly compares US equity carve-outs and common IPOs presents first findings in this direction and explains his results by the strategic focus of carve-outs, parents as an active and superior monitors and reduced overpricing due to reputational aspects. Prezas et al [1] find a significant three year underperformance of equity carve-outs compared to common IPOs. The contradictive evidence presented so far indicates the valuable contribution of additional results from other stock markets. Approach and specification of the event study.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
