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The Impacts of Parent’s Listing Status on Subsidiary’s Financial Constraint and Cost of Equity Capital: The Case of Equity Carve-Outs
Tam, Lewis H. K.
2014
Source PublicationACCOUNTING AND FINANCE
ISSN0810-5391
Volume54Issue:1Pages:275-299
Abstract

We find that listed parents’ carve-outs have investment-cash flow sensitivities 80% lower than unlisted parents’ carve-outs, on average. Such a finding is stronger when we consider only equity carve-outs in technological industries. The finding suggests that listed parents are more capable of alleviating the financial constraint of their carved-out units than private parents. Our further analysis shows that listed parents' carve-outs also have a lower cost of equity than their counterparts, but such difference cannot be explained by corporate transparency, as implied by analyst coverage and analysts’ forecast dispersion. Therefore, we argue that the benefits from affiliation with a listed parent to the carve-out come mainly from the parent’s financial support rather than an increase in corporate transparency.

KeywordEquity Carve-outs Implied Cost Of Equity Financial Constraint Investment-cash Flow Sensitivity Listed Parent
DOIhttps://doi.org/10.1111/j.1467-629X.2012.00503.x
Indexed BySSCI ; SSCI
Language英语
WOS Research AreaBusiness & Economics
WOS SubjectBusiness, Finance
WOS IDWOS:000332063800012
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Cited Times [WOS]:4   [WOS Record]     [Related Records in WOS]
Document TypeJournal article
CollectionFaculty of Business Administration
DEPARTMENT OF FINANCE AND BUSINESS ECONOMICS
AffiliationFaculty of Business Administration, University of Macau
First Author AffilicationFaculty of Business Administration
Recommended Citation
GB/T 7714
Tam, Lewis H. K.. The Impacts of Parent’s Listing Status on Subsidiary’s Financial Constraint and Cost of Equity Capital: The Case of Equity Carve-Outs[J]. ACCOUNTING AND FINANCE,2014,54(1):275-299.
APA Tam, Lewis H. K..(2014).The Impacts of Parent’s Listing Status on Subsidiary’s Financial Constraint and Cost of Equity Capital: The Case of Equity Carve-Outs.ACCOUNTING AND FINANCE,54(1),275-299.
MLA Tam, Lewis H. K.."The Impacts of Parent’s Listing Status on Subsidiary’s Financial Constraint and Cost of Equity Capital: The Case of Equity Carve-Outs".ACCOUNTING AND FINANCE 54.1(2014):275-299.
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