James E. Owers

Security price reactions around corporate spin-off announcements

Abstract We examine security price reactions around the announcements of 123 voluntary spin-offs by 116 firms between 1963 and 1981 involving a pro-rata distribution of the common stock of a subsidiary to the stockholders of the parent firm. The median spin-off in the sample is 6.6% of the original equity value and is associated with an abnormal return of 7.0% from 50 days prior to the announcement through completion of the spin-off. No evidence is found to indicate the gains to stockholders represent wealth transfers from senior securityholders. Over the entire event period we find positive gains for firms engaging in spin-offs to facilitate mergers or to separate diverse operating units but negative returns to firms responding to legal and/or regulatory difficulties. In the two-day interval surrounding the first press announcement we find positive average excess returns for all groups.

The market for interfirm asset sales: Partial sell-offs and total liquidations

Abstract We investigate the valuation consequences of voluntary proposals to sell part or all of a corporations assets. For partial sell-offs, successful sellers and buyers reap statistically significant abnormal returns of 1.66% and 0.83%, respectively. Unsuccessful sellers realize gains at the bid announcement of 1.41% that are lost at the offer termination. In contrast, proposals to liquidate the firm are associated with significant average abnormal returns of 12.24%. We interpret these findings as evidence that asset sales are associated with the movement of resources to higher-valued uses rather than as evidence of market mispricing before the divestiture announcements.

Stockholder Reactions to CEO Changes in Large Corporations

The literature on leadership suggests that the performance context of a succession event and the origin of a newly appointed leader moderate the relationship between the succession and its conseque...

The Separation of Real Estate Operations By Spin-Off

In this paper, we consider spin-offs as a vehicle to separate real estate operations from other real estate and/or non-real estate operations. For a sample of 33 such spin-offs announced and completed between 1962 and 1982, we document significantly positive abnormal returns around spin-off announcements. Using the standard event-time methodology, we find average excess returns of 5.7% in the two-day interval surrounding the first Wall Street Journal report of a pending spin-off. While the gains associated with spin-offs by real estate firms are positive on average, they are small in comparison to the 9.1% two-day announcement period abnormal returns surrounding proposals by non-real estate firms to divest real estate operations. Copyright American Real Estate and Urban Economics Association.

Wealth Reduction in White Knight Bids

The paper investigates the value changes experienced by white knights when they are involved in corporate control contests. Close to 80% of the white knights incur a negative abnormal return for the two-day window ending on the date of their bid. The losses persist for longer windows on either side of the event. We examine a set of matched-trios where all parties to the control contest are exchange-listed, and observe that from a welfare economics perspective, these contests do not lead to Pareto superior states, but meet the weaker efficiency criterion of the Hicks-Kaldor compensation principle.

Alternative Profitability Measures and Marketing Channel Structure: The Franchise Decision

Abstract Analysis of marketing channel structure in general, and the decision to franchise in particular, has assumed that the decision maker is seeking to maximize the long-term economic value of the firm. In this article, we consider an alternative accounting-based objective function. We explore some circumstances that might lead to the use of an accounting-based objective function, including the incentive structure faced by non-owner managers, the life cycle of the firm including an impending initial public offering, and data availability considerations. A simple model of franchisor performance is developed and several scenarios of franchise system expansion examined. Decisions to open franchised or company-owned outlets are compared using the competing objective functions.

The Investment Performance of Real Estate Limited Partnerships

Real estate limited partnerships have become an increasingly popular form of investment over the past decade. Many investors have been drawn to these investment vehicles because of the high claimed rates of return earned by investors in previous partnerships. However, there has been little analysis of the historical rates of return on these investments other than that provided by the syndicators in offering prospectuses. This paper examines the returns earned by investors in real estate limited partnerships over the past decade. These results are compared with previous studies of the investment performance of real estate. Because of the importance of the tax shield aspects of these investments, we calculate the after-tax rate of return for investors in several marginal tax brackets. Copyright American Real Estate and Urban Economics Association.

Divestiture Restructuring in the Media Industries: A Financial Market Case Analysis

Abstract Much attention has been paid to restructuring in the media industries. Most of this attention has been directed at mergers and acquisitions and the associated increase in industry concentration. What has been largely overlooked is the extent of restructuring that reduces the size of media firms—divestitures. This article examines several cases of major media divestitures and calibrates the impact of these sell-off and spin-off restructuring events on the value of divesting firms. The analysis uses case studies and event study methodology. Given that the overall role of managers of large firms is to maximize the value and stock price, this event methodology directly measures the impact of divestitures on this ultimate goal of maximizing firm value. Case analysis examines the managerial strategies that motivated the divestiture event to explore the complexities of the divestiture as it unfolded. Event analysis results confirm abnormal returns that have the potential to significantly enhance the value of divesting firms.

Market Reactions to Merger, Acquisition, and Divestiture Announcements in the Media Industries

There has been extensive restructuring in the media industries in recent times. This article examines the effects of large media restructuring transactions on the value of firms engaging in such transactions. It considers all media restructuring transactions with a value of over

Does Deposit Insurance Retard the Development of Financial Markets

1 billion between 1997 and 2008—a time period that included 1 of the largest waves of mergers and acquisitions (M&A) activity in industrial history, and was marked in media by transformative changes in the industry due to digital technology and the loosening of ownership restrictions under the Telecommunications Act of 1996. Over that time period, 57 M&A transactions with a total value of