Skip to main content
Top
Published in: Review of Quantitative Finance and Accounting 4/2023

30-01-2023 | Original Research

Corporate communication and shareholder base retention: evidence from spin-offs

Author: Ryan P. McDonough

Published in: Review of Quantitative Finance and Accounting | Issue 4/2023

Log in

Activate our intelligent search to find suitable subject content or patents.

search-config
loading …

Abstract

I ask whether corporate communication programs influence shareholder base retention. I use spin-offs to study the communication programs of the spun-off business units that inherit their parent firms’ shareholders. Unit firms that initiate a communication program maintain higher levels of post-spin-off institutional ownership and retain more of the inherited institutional shareholder base than firms that do not communicate. An important benefit of communication is that these firms avoid the stock price pressure commonly experienced by unit firms following a sell-off by the inherited institutional shareholder base. This paper extends our understanding of the role of communication in retaining institutional shareholders.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

Appendix
Available only for authorised users
Footnotes
1
See Healy and Palepu (2001), Verrecchia (2001), and Beyer et al. (2010) for reviews of the disclosure literature.
 
2
Many studies examine the antecedents, consequences, and properties of management earnings forecasts. See Hirst et al. (2008) for a review of the management forecast literature.
 
3
Studies that examine the role and usefulness of conference calls include Tasker (1998), Frankel et al. (1999), Bowen et al. (2002), Bushee et al. (2003, 2004), Kimbrough and Louis (2011), and Matsumoto et al. (2011). In addition to conference calls, conference presentations (e.g., Francis et al. 1997; Bushee et al. 2011; Green et al. 2014a, 2014b), one-on-one private meetings (e.g., Soltes 2014; Solomon and Soltes 2015; Bushee et al. 2017), analyst and investor days (Kirk and Markov 2016), social media (e.g., Blankespoor et al. 2014; Lee et al. 2015), and corporate site visits (e.g., Cheng et al. 2016, 2019) also provide important opportunities for firms to communicate and interact with analysts and investors.
 
4
The unit firm assembles its own board of directors and management team (e.g., Seward and Walsh 1996; Wruck and Wruck 2002; Ahn and Walker 2007; Denis et al. 2015; Feldman 2016a, 2016b). The unit firm’s management team makes operating, investment, and financing decisions (e.g., Gertner et al. 2002; Dittmar 2004; Cronqvist et al. 2009; Chemmanur et al. 2014).
 
5
In particular, the original cost basis of a shareholder’s pre-spin-off parent firm shares is carried over and allocated to the post-spin-off shares of the parent and unit firms. Shareholders allocate the pre-spin-off cost basis in accordance with the relative fair market values of the post-spin-off parent and unit firms’ shares. Shareholders use the closing stock prices on the first full day of trading as standalone firms to estimate fair market values.
 
6
Market commentators often note that once a unit firm’s shares are distributed to parent firm shareholders, institutional shareholders often immediately sell their shares of the unit firm without regard to price or fundamentals. The reasons commonly provided for why this phenomenon occurs include the following: the unit firm is too small (in absolute terms and as a percentage of a large investor’s portfolio) for an institutional investor to want to continue owning the stock, index-driven selling by index funds, and the prospects of the unit firm are poorly understood because of insufficient communication and a lack of analyst coverage. Note that Feldman et al. (2014) find that pre-spin-off parent firm analysts typically offer only limited, if any, insights into soon-to-be-standalone unit firms. In addition, although Gilson et al. (2001) examine analysts’ decisions to cover a firm’s stock after the firm splits from a conglomerate firm, they evaluate the three years following a stock breakup, which includes spin-offs as well as equity carve-outs and targeted stock offerings, but they do not report the extent to which the new stocks are covered by analysts immediately following a stock breakup.
 
7
Professional institutional investment managers typically consider, for example, broad groups of stocks based on size, growth, payout policy, index membership, and exchange listing in the process of developing an equity portfolio allocation strategy. They then decide whether and how to allocate their funds across different types of stocks (e.g., Barberis and Shleifer 2003; Nagel 2005). Gompers and Metrick (2001) report that institutions prefer relatively large and liquid stocks. In addition to Gompers and Metrick (2001), many prior studies examine the relation between firms’ fundamental characteristics and institutional investors’ investment decisions (e.g., Badrinath et al. 1989; Del Guercio 1996; Falkenstein 1996; Bushee 1998; Bushee 2001; Bushee et al. 2014).
 
8
I define the parent firm as the firm that retains the same CRSP Permanent Issue Identifier (PERMNO) from pre- to post-spin-off. Unit firms receive a PERMNO when their shares begin trading publicly. If the unit firm has publicly traded equity before the tax-free spin-off is completed, it will already have had a PERMNO assigned. 51 unit firms (i.e., 16% of the unit firm sample) have publicly traded equity before the spin-off. In robustness tests, I confirm that excluding unit firms with pre-spin-off publicly traded equity does not affect the results (see Sect. 4.4.3). I also find that if I define the parent firm as the larger of the post-spin-off entities and the unit firm as the smaller of the post-spin-off entities, I obtain similar results (see Sect. 4.4.4).
 
9
Standard and Poor’s considers firms’ market capitalization, liquidity, performance, exchange listing, public float, and domicile. See: https://​us.​spindices.​com/​documents/​methodologies/​methodology-sp-us-indices.​pdf.
 
10
When a pre-spin-off combined firm is not included in a major S&P index, it is uncommon for the post-spin-off standalone firms to be included in an S&P index. This is the case for only four post-spin-off parent firms and five post-spin-off unit firms. In addition, when a pre-spin-off combined firm is not in the S&P 500 index, it is uncommon for the post-spin-off firms to be included in the S&P 500. This is the case for only one post-spin-off unit firm.
 
11
For example, in 1999, Watts Industries spun-off its industrial, oil, and gas businesses into a company known as CIRCOR International. While the institutional shareholder base of Watts Industries remained stable from pre- to post-spin-off, CIRCOR experienced a significant decline in institutional ownership of about 25% (i.e., from approximately 78 to 53%), as well as significant stock price pressure. Similarly, in 2014, Kimball International spun-off its electronic manufacturing services segment into a company known as Kimball Electronics. The spun-off company experienced a drop in institutional ownership of approximately 14% (i.e., from about 48 to 34%). Like CIRCOR, Kimball Electronics experienced stock price pressure following the spin-off.
 
12
Corporate executives and Investor Relations Officers conduct roadshows to educate the investment community about their company and to build and maintain relationships with shareholders (e.g., Bragg 2014).
 
13
Extending the communication window beyond 90 days before a spin-off distribution does not affect the results. In particular, nearly all unit firm communication occurs in the month immediately before a spin-off. Furthermore, including unit firms’ earnings conference calls in the post-spin-off period also does not affect the results.
 
14
For example, in 2000, Cabot Corporation spun-off a business segment that would be named Cabot Microelectronics Corporation. Cabot Microelectronics conducted a spin-off roadshow; total institutional ownership remained flat between 62 and 64% following the spin-off. Similarly, in 2011, Expedia spun-off TripAdvisor. TripAdvisor conducted a spin-off roadshow and experienced virtually no change in its total institutional ownership (i.e., about 70%).
 
15
One challenge in identifying, coding, and controlling for the motive behind a spin-off is that, in their spin-off-related press releases, parent firm executives often cite multiple motives and tend to cast the spin-off in a positive yet vague manner. Common, non-mutually exclusive reasons to undertake a spin-off include to improve corporate focus, to reduce risk, to improve the compensation incentives of key employees through stock ownership plans tied to the performance of specific business segments, cost-savings initiatives, and occasionally to facilitate an acquisition (although, as discussed in Sect. 3.1, I drop spin-offs that are undertaken for the purpose of facilitating a merger or acquisition). Furthermore, Fich et al. (2014) and Feldman (2016a) find that parent firm CEOs benefit from spin-offs through increased compensation, despite managing a smaller post-spin-off parent firm.
 
16
Despite potential concerns that standalone unit firms tend to be relatively low quality assets, prior research generally finds that corporate spin-offs are associated with beneficial capital market outcomes for the firms involved, which may stem from improvements in internal capital allocation. A large literature examines the link between corporate diversification and firm value (e.g., Palepu 1985; Lang and Stulz 1994; Berger and Ofek 1995; Comment and Jarrell 1995; Whited 2001; Campa and Kedia 2002; Villalonga 2004a, 2004b). Within this research stream, many studies focus on the corporate spin-off setting to assess the effect of diversification on firm performance and valuation. Studies focusing on the spin-off setting include Hite and Owers (1983), Miles and Rosenfeld (1983), Schipper and Smith (1983), Cusatis et al. (1993), Daley et al. (1997), Parrino (1997), Berger and Ofek (1999), Desai and Jain (1999), Burch and Nanda (2003), Dittmar and Shivdasani (2003), Maxwell and Rao (2003), Ahn and Denis (2004), Chemmanur and Yan (2004), McNeil and Moore (2005), and Colak and Whited (2007). The general takeaway from this literature is that conglomerates, on average, trade at a discount (i.e., the “diversification discount”) and that focusing initiatives, such as spin-offs, are associated with increases in firm value. However, prior studies offer mixed results regarding whether and to what extent improvements in firm value are caused by improvements in investment efficiency.
 
17
Alternatively, index fund managers, who know they will need to exit their position in the post-spin-off unit firm, may push unit firms to increase disclosure in the pre-spin-off period to help minimize their trading costs by increasing liquidity in the post-spin-off trading environment (Boone and White 2015; Schoenfeld 2017).
 
18
Although in Table 9 I use CRSP value-weighted market returns, for robustness I also compute equal-weighted returns, and the results remain qualitatively similar.
 
19
I thank Brian Bushee for making his institutional investor classifications available. The classification variables are publicly available at https://​accounting-faculty.​wharton.​upenn.​edu/​bushee/​.
 
Literature
go back to reference Abarbanell J, Bushee B, Raedy J (2003) Institutional investor preferences and price pressure: the case of corporate spin-offs. J Bus 76(2):233–261 CrossRef Abarbanell J, Bushee B, Raedy J (2003) Institutional investor preferences and price pressure: the case of corporate spin-offs. J Bus 76(2):233–261 CrossRef
go back to reference Ahn S, Denis D (2004) Internal capital markets and investment policy: evidence from corporate spinoffs. J Financ Econ 71(3):489–516 CrossRef Ahn S, Denis D (2004) Internal capital markets and investment policy: evidence from corporate spinoffs. J Financ Econ 71(3):489–516 CrossRef
go back to reference Ahn S, Walker M (2007) Corporate governance and the spinoff decision. J Corp Finan 13(1):76–93 CrossRef Ahn S, Walker M (2007) Corporate governance and the spinoff decision. J Corp Finan 13(1):76–93 CrossRef
go back to reference Anantharaman D, Zhang Y (2011) Cover me: managers’ responses to changes in analyst coverage in the post-regulation FD period. Account Rev 86(6):1851–1885 CrossRef Anantharaman D, Zhang Y (2011) Cover me: managers’ responses to changes in analyst coverage in the post-regulation FD period. Account Rev 86(6):1851–1885 CrossRef
go back to reference Badrinath S, Gay G, Kale J (1989) Patterns of institutional investment, prudence, and the managerial “safety-net” hypothesis. J Risk Insur 56(4):605–629 CrossRef Badrinath S, Gay G, Kale J (1989) Patterns of institutional investment, prudence, and the managerial “safety-net” hypothesis. J Risk Insur 56(4):605–629 CrossRef
go back to reference Barberis N, Shleifer A (2003) Style investing. J Financ Econ 68(2):161–199 CrossRef Barberis N, Shleifer A (2003) Style investing. J Financ Econ 68(2):161–199 CrossRef
go back to reference Bazhutov D, Betzer A, Brochet F, Doumet M, Limbach P (2022) The supply and effectiveness of investor relations in insider- vs. outsider-oriented markets. Manag Sci, forthcoming Bazhutov D, Betzer A, Brochet F, Doumet M, Limbach P (2022) The supply and effectiveness of investor relations in insider- vs. outsider-oriented markets. Manag Sci, forthcoming
go back to reference Berger P, Ofek E (1995) Diversification’s effect on firm value. J Financ Econ 37(1):39–65 CrossRef Berger P, Ofek E (1995) Diversification’s effect on firm value. J Financ Econ 37(1):39–65 CrossRef
go back to reference Berger P, Ofek E (1999) Causes and effects of corporate refocusing programs. Rev Financ Stud 12(2):311–345 CrossRef Berger P, Ofek E (1999) Causes and effects of corporate refocusing programs. Rev Financ Stud 12(2):311–345 CrossRef
go back to reference Beyer A, Cohen D, Lys T, Walther B (2010) The financial reporting environment: review of the recent literature. J Account Econ 50(1–2):296–343 CrossRef Beyer A, Cohen D, Lys T, Walther B (2010) The financial reporting environment: review of the recent literature. J Account Econ 50(1–2):296–343 CrossRef
go back to reference Beyer A, Larcker D, Tayan B (2014) Study on how investment horizon and expectations of shareholder base impact corporate decision-making. Unpublished working paper. National Investor Relations Institute and the Rock Center for Corporate Governance, Stanford Beyer A, Larcker D, Tayan B (2014) Study on how investment horizon and expectations of shareholder base impact corporate decision-making. Unpublished working paper. National Investor Relations Institute and the Rock Center for Corporate Governance, Stanford
go back to reference Blankespoor E, Miller G, White H (2014) The role of dissemination in market liquidity: evidence from firms’ use of Twitter. Account Rev 89(1):79–112 CrossRef Blankespoor E, Miller G, White H (2014) The role of dissemination in market liquidity: evidence from firms’ use of Twitter. Account Rev 89(1):79–112 CrossRef
go back to reference Blankespoor E, Hendricks B, Miller G (2017) Perceptions and price: evidence from CEO presentations at IPO roadshows. J Account Res 55(2):275–327 CrossRef Blankespoor E, Hendricks B, Miller G (2017) Perceptions and price: evidence from CEO presentations at IPO roadshows. J Account Res 55(2):275–327 CrossRef
go back to reference Blankespoor E, Hendricks B, Miller G (2022) The pitch: managers’ disclosure choice during IPO roadshows. Account Rev, forthcoming Blankespoor E, Hendricks B, Miller G (2022) The pitch: managers’ disclosure choice during IPO roadshows. Account Rev, forthcoming
go back to reference Blouin J, Bushee B, Sikes S (2017) Measuring tax-sensitive institutional investor ownership. Account Rev 92(6):49–76 CrossRef Blouin J, Bushee B, Sikes S (2017) Measuring tax-sensitive institutional investor ownership. Account Rev 92(6):49–76 CrossRef
go back to reference Blume M, Keim D (2012) Institutional investors and stock market liquidity: trends and relationships. Unpublished working paper. University of Pennsylvania, Philadelphia Blume M, Keim D (2012) Institutional investors and stock market liquidity: trends and relationships. Unpublished working paper. University of Pennsylvania, Philadelphia
go back to reference Boone A, White J (2015) The effect of institutional ownership on firm transparency and information production. J Financ Econ 117(3):508–533 CrossRef Boone A, White J (2015) The effect of institutional ownership on firm transparency and information production. J Financ Econ 117(3):508–533 CrossRef
go back to reference Bowen R, Davis A, Matsumoto D (2002) Do conference calls affect analysts’ forecasts? Account Rev 77(2):285–316 CrossRef Bowen R, Davis A, Matsumoto D (2002) Do conference calls affect analysts’ forecasts? Account Rev 77(2):285–316 CrossRef
go back to reference Bradley D, Jame R, Williams J (2022) Non-deal roadshows, informed trading, and analyst conflicts of interest. J Financ 77(1):265–315 CrossRef Bradley D, Jame R, Williams J (2022) Non-deal roadshows, informed trading, and analyst conflicts of interest. J Financ 77(1):265–315 CrossRef
go back to reference Bradshaw M, Bushee B, Miller G (2004) Accounting choice, home bias, and U.S. investment in non-U.S. firms. J Account Res 42(5):795–841 CrossRef Bradshaw M, Bushee B, Miller G (2004) Accounting choice, home bias, and U.S. investment in non-U.S. firms. J Account Res 42(5):795–841 CrossRef
go back to reference Bragg S (2014) The investor relations guidebook. Accounting Tools, Centennial Bragg S (2014) The investor relations guidebook. Accounting Tools, Centennial
go back to reference Brennan M, Tamarowski C (2000) Investor relations, liquidity, and stock prices. J Appl Corp Financ 12(4):26–37 CrossRef Brennan M, Tamarowski C (2000) Investor relations, liquidity, and stock prices. J Appl Corp Financ 12(4):26–37 CrossRef
go back to reference Brown K, Brooke B (1993) Institutional demand and security price pressure: the case of corporate spin-offs. Financ Anal J 49(5):53–62 CrossRef Brown K, Brooke B (1993) Institutional demand and security price pressure: the case of corporate spin-offs. Financ Anal J 49(5):53–62 CrossRef
go back to reference Brown L, Call A, Clement M, Sharp N (2015) Inside the “black box” of sell-side financial analysts. J Account Res 53(1):1–47 CrossRef Brown L, Call A, Clement M, Sharp N (2015) Inside the “black box” of sell-side financial analysts. J Account Res 53(1):1–47 CrossRef
go back to reference Brown L, Call A, Clement M, Sharp N (2016) The activities of buy-side analysts and the determinants of their stock recommendations. J Account Econ 62(1):139–156 CrossRef Brown L, Call A, Clement M, Sharp N (2016) The activities of buy-side analysts and the determinants of their stock recommendations. J Account Econ 62(1):139–156 CrossRef
go back to reference Brown L, Call A, Clement M, Sharp N (2019) Managing the narrative: investor relations officers and corporate disclosure. J Account Econ 67(1):58–79 CrossRef Brown L, Call A, Clement M, Sharp N (2019) Managing the narrative: investor relations officers and corporate disclosure. J Account Econ 67(1):58–79 CrossRef
go back to reference Burch T, Nanda V (2003) Divisional diversity and the conglomerate discount: evidence from spinoffs. J Financ Econ 70(1):69–98 CrossRef Burch T, Nanda V (2003) Divisional diversity and the conglomerate discount: evidence from spinoffs. J Financ Econ 70(1):69–98 CrossRef
go back to reference Bushee B (1998) The influence of institutional investors on myopic R&D investment behavior. Account Rev 73(3):305–333 Bushee B (1998) The influence of institutional investors on myopic R&D investment behavior. Account Rev 73(3):305–333
go back to reference Bushee B (2001) Do institutional investors prefer near-term earnings over long-run value? Contemp Account Res 18(2):207–246 CrossRef Bushee B (2001) Do institutional investors prefer near-term earnings over long-run value? Contemp Account Res 18(2):207–246 CrossRef
go back to reference Bushee B (2004) Identifying and attracting the “right” investors: evidence on the behavior of institutional investors. J Appl Corp Financ 16(4):28–35 CrossRef Bushee B (2004) Identifying and attracting the “right” investors: evidence on the behavior of institutional investors. J Appl Corp Financ 16(4):28–35 CrossRef
go back to reference Bushee B, Miller G (2012) Investor relations, firm visibility, and investor following. Account Rev 87(3):867–897 CrossRef Bushee B, Miller G (2012) Investor relations, firm visibility, and investor following. Account Rev 87(3):867–897 CrossRef
go back to reference Bushee B, Noe C (2000) Corporate disclosure practices, institutional investors, and stock return volatility. J Account Res 38:171–202 CrossRef Bushee B, Noe C (2000) Corporate disclosure practices, institutional investors, and stock return volatility. J Account Res 38:171–202 CrossRef
go back to reference Bushee B, Matsumoto D, Miller G (2003) Open versus closed conference calls: the determinants and effects of broadening access to disclosure. J Account Econ 34(1–3):149–180 CrossRef Bushee B, Matsumoto D, Miller G (2003) Open versus closed conference calls: the determinants and effects of broadening access to disclosure. J Account Econ 34(1–3):149–180 CrossRef
go back to reference Bushee B, Matsumoto D, Miller G (2004) Managerial and investor responses to disclosure regulation: the case of Reg FD and conference calls. Account Rev 79(3):617–643 CrossRef Bushee B, Matsumoto D, Miller G (2004) Managerial and investor responses to disclosure regulation: the case of Reg FD and conference calls. Account Rev 79(3):617–643 CrossRef
go back to reference Bushee B, Jung M, Miller G (2011) Conference presentations and the disclosure milieu. J Account Res 49(5):1163–1192 CrossRef Bushee B, Jung M, Miller G (2011) Conference presentations and the disclosure milieu. J Account Res 49(5):1163–1192 CrossRef
go back to reference Bushee B, Carter ME, Gerakos J (2014) Institutional investor preferences for corporate governance mechanisms. J Manag Account Res 26(2):123–149 CrossRef Bushee B, Carter ME, Gerakos J (2014) Institutional investor preferences for corporate governance mechanisms. J Manag Account Res 26(2):123–149 CrossRef
go back to reference Bushee B, Jung M, Miller G (2017) Do investors benefit from selective access to management? J Financ Report 2(1):33–61 Bushee B, Jung M, Miller G (2017) Do investors benefit from selective access to management? J Financ Report 2(1):33–61
go back to reference Campa J, Kedia S (2002) Explaining the diversification discount. J Financ 57(4):1731–1762 CrossRef Campa J, Kedia S (2002) Explaining the diversification discount. J Financ 57(4):1731–1762 CrossRef
go back to reference Carter ME, Soo B (1999) The relevance of form 8-K reports. J Account Res 37(1):119–132 CrossRef Carter ME, Soo B (1999) The relevance of form 8-K reports. J Account Res 37(1):119–132 CrossRef
go back to reference Chahine S, Colak G, Hasan I, Mazboudi M (2020) Investor relations and IPO performance. Rev Acc Stud 25:474–512 CrossRef Chahine S, Colak G, Hasan I, Mazboudi M (2020) Investor relations and IPO performance. Rev Acc Stud 25:474–512 CrossRef
go back to reference Chapman K, Miller GS, White HD (2019) Investor relations and information assimilation. Account Rev 94(2):105–131 CrossRef Chapman K, Miller GS, White HD (2019) Investor relations and information assimilation. Account Rev 94(2):105–131 CrossRef
go back to reference Chapman K, Miller GS, Neilson JJ, White HD (2022) Investor relations, engagement, and shareholder activism. Account Rev 97(2):77–106 CrossRef Chapman K, Miller GS, Neilson JJ, White HD (2022) Investor relations, engagement, and shareholder activism. Account Rev 97(2):77–106 CrossRef
go back to reference Chemmanur T, He S (2016) Institutional trading, information production, and corporate spin-offs. J Corp Finan 38:54–76 CrossRef Chemmanur T, He S (2016) Institutional trading, information production, and corporate spin-offs. J Corp Finan 38:54–76 CrossRef
go back to reference Chemmanur T, Yan A (2004) A theory of corporate spin-offs. J Financ Econ 72(2):259–290 CrossRef Chemmanur T, Yan A (2004) A theory of corporate spin-offs. J Financ Econ 72(2):259–290 CrossRef
go back to reference Chemmanur T, Krishnan K, Nandy D (2014) The effects of corporate spin-offs on productivity. J Corp Finan 27:72–98 CrossRef Chemmanur T, Krishnan K, Nandy D (2014) The effects of corporate spin-offs on productivity. J Corp Finan 27:72–98 CrossRef
go back to reference Chen H, Noronha G, Singal V (2004) The price response to S&P 500 index additions and deletions: evidence of asymmetry and a new explanation. J Financ 59(4):1901–1930 CrossRef Chen H, Noronha G, Singal V (2004) The price response to S&P 500 index additions and deletions: evidence of asymmetry and a new explanation. J Financ 59(4):1901–1930 CrossRef
go back to reference Cheng Q, Du F, Wang X, Wang Y (2016) Seeing is believing: analysts’ corporate site visits. Rev Acc Stud 21(4):1245–1286 CrossRef Cheng Q, Du F, Wang X, Wang Y (2016) Seeing is believing: analysts’ corporate site visits. Rev Acc Stud 21(4):1245–1286 CrossRef
go back to reference Cheng Q, Du F, Wang X, Wang Y (2019) Do corporate site visits impact stock prices? Contemp Account Res 36(1):359–388 CrossRef Cheng Q, Du F, Wang X, Wang Y (2019) Do corporate site visits impact stock prices? Contemp Account Res 36(1):359–388 CrossRef
go back to reference Chuk E, Matsumoto D, Miller G (2013) Assessing methods of identifying management forecasts: CIG vs. hand-collection. J Account Econ 55(1):23–42 CrossRef Chuk E, Matsumoto D, Miller G (2013) Assessing methods of identifying management forecasts: CIG vs. hand-collection. J Account Econ 55(1):23–42 CrossRef
go back to reference Clarkson P, Kao J, Richardson G (1999) Evidence that management discussion and analysis (MD&A) is a part of a firm’s overall disclosure package. Contemp Account Res 16(1):111–134 CrossRef Clarkson P, Kao J, Richardson G (1999) Evidence that management discussion and analysis (MD&A) is a part of a firm’s overall disclosure package. Contemp Account Res 16(1):111–134 CrossRef
go back to reference Colak G, Whited T (2007) Spin-offs, divestitures, and conglomerate investment. Rev Financ Stud 20(3):557–595 CrossRef Colak G, Whited T (2007) Spin-offs, divestitures, and conglomerate investment. Rev Financ Stud 20(3):557–595 CrossRef
go back to reference Comment R, Jarrell G (1995) Corporate focus and stock returns. J Financ Econ 37(1):67–87 CrossRef Comment R, Jarrell G (1995) Corporate focus and stock returns. J Financ Econ 37(1):67–87 CrossRef
go back to reference Cronqvist H, Low A, Nilsson M (2009) Persistence of firm policies, firm origin, and corporate culture: evidence from corporate spin-offs. Unpublished working paper. Claremont McKenna College, Claremont Cronqvist H, Low A, Nilsson M (2009) Persistence of firm policies, firm origin, and corporate culture: evidence from corporate spin-offs. Unpublished working paper. Claremont McKenna College, Claremont
go back to reference Cusatis P, Miles J, Woolridge JR (1993) Restructuring through spin-offs: the stock market evidence. J Financ Econ 33(3):293–311 CrossRef Cusatis P, Miles J, Woolridge JR (1993) Restructuring through spin-offs: the stock market evidence. J Financ Econ 33(3):293–311 CrossRef
go back to reference Daley L, Mehrotra V, Sivakumar R (1997) Corporate focus and value creation: evidence from spin-offs. J Financ Econ 45(2):257–281 CrossRef Daley L, Mehrotra V, Sivakumar R (1997) Corporate focus and value creation: evidence from spin-offs. J Financ Econ 45(2):257–281 CrossRef
go back to reference Del Guercio D (1996) The distorting effect of the prudent-man laws on institutional equity investments. J Financ Econ 40(1):31–62 CrossRef Del Guercio D (1996) The distorting effect of the prudent-man laws on institutional equity investments. J Financ Econ 40(1):31–62 CrossRef
go back to reference Denis D, Denis D, Walker M (2015) CEO assessment and the structure of newly formed boards. Rev Financ Stud 28(12):3338–3366 CrossRef Denis D, Denis D, Walker M (2015) CEO assessment and the structure of newly formed boards. Rev Financ Stud 28(12):3338–3366 CrossRef
go back to reference Desai H, Jain P (1999) Firm performance and focus: long-run stock market performance following spin-offs. J Financ Econ 54(1):75–101 CrossRef Desai H, Jain P (1999) Firm performance and focus: long-run stock market performance following spin-offs. J Financ Econ 54(1):75–101 CrossRef
go back to reference Diamond D, Verrecchia R (1991) Disclosure, liquidity, and the cost of capital. J Financ 46(4):1325–1360 CrossRef Diamond D, Verrecchia R (1991) Disclosure, liquidity, and the cost of capital. J Financ 46(4):1325–1360 CrossRef
go back to reference Dittmar A (2004) Capital structure in corporate spin-offs. J Bus 77(1):9–43 CrossRef Dittmar A (2004) Capital structure in corporate spin-offs. J Bus 77(1):9–43 CrossRef
go back to reference Dittmar A, Shivdasani A (2003) Divestitures and divisional investment policies. J Financ 58(6):2711–2744 CrossRef Dittmar A, Shivdasani A (2003) Divestitures and divisional investment policies. J Financ 58(6):2711–2744 CrossRef
go back to reference Edmans A, Goldstein I, Jiang W (2012) The real effects of financial markets: the impact of prices on takeovers. J Financ 67(3):933–971 CrossRef Edmans A, Goldstein I, Jiang W (2012) The real effects of financial markets: the impact of prices on takeovers. J Financ 67(3):933–971 CrossRef
go back to reference Falkenstein E (1996) Preferences for stock characteristics as revealed by mutual fund portfolio holdings. J Financ 51(1):111–135 CrossRef Falkenstein E (1996) Preferences for stock characteristics as revealed by mutual fund portfolio holdings. J Financ 51(1):111–135 CrossRef
go back to reference Feldman E (2016a) Managerial compensation and corporate spinoffs. Strateg Manag J 37(10):2011–2030 CrossRef Feldman E (2016a) Managerial compensation and corporate spinoffs. Strateg Manag J 37(10):2011–2030 CrossRef
go back to reference Feldman E (2016b) Dual directors and the governance of corporate spinoffs. Acad Manag J 59(5):1754–1776 CrossRef Feldman E (2016b) Dual directors and the governance of corporate spinoffs. Acad Manag J 59(5):1754–1776 CrossRef
go back to reference Feldman E, Gilson S, Villalonga B (2014) Do analysts add value when they most can? Evidence from corporate spin-offs. Strateg Manag J 35(10):1446–1463 CrossRef Feldman E, Gilson S, Villalonga B (2014) Do analysts add value when they most can? Evidence from corporate spin-offs. Strateg Manag J 35(10):1446–1463 CrossRef
go back to reference Fich E, Starks L, Yore A (2014) CEO deal-making activities and compensation. J Financ Econ 114(3):471–492 CrossRef Fich E, Starks L, Yore A (2014) CEO deal-making activities and compensation. J Financ Econ 114(3):471–492 CrossRef
go back to reference Francis J, Hanna JD, Philbrick D (1997) Management communications with securities analysts. J Account Econ 24(3):363–394 CrossRef Francis J, Hanna JD, Philbrick D (1997) Management communications with securities analysts. J Account Econ 24(3):363–394 CrossRef
go back to reference Francis J, Schipper K, Vincent L (2002) Expanded disclosures and the increased usefulness of earnings announcements. Account Rev 77(3):515–546 CrossRef Francis J, Schipper K, Vincent L (2002) Expanded disclosures and the increased usefulness of earnings announcements. Account Rev 77(3):515–546 CrossRef
go back to reference Frankel R, Johnson M, Skinner D (1999) An empirical examination of conference calls as a voluntary disclosure medium. J Account Res 37(1):133–150 CrossRef Frankel R, Johnson M, Skinner D (1999) An empirical examination of conference calls as a voluntary disclosure medium. J Account Res 37(1):133–150 CrossRef
go back to reference Gao X, Ritter J (2010) The marketing of seasoned equity offerings. J Financ Econ 97(1):33–52 CrossRef Gao X, Ritter J (2010) The marketing of seasoned equity offerings. J Financ Econ 97(1):33–52 CrossRef
go back to reference Gertner R, Powers E, Scharfstein D (2002) Learning about internal capital markets from corporate spin-offs. J Financ 57(6):2479–2506 CrossRef Gertner R, Powers E, Scharfstein D (2002) Learning about internal capital markets from corporate spin-offs. J Financ 57(6):2479–2506 CrossRef
go back to reference Gilson S, Healy P, Noe C, Palepu K (2001) Analyst specialization and conglomerate stock breakups. J Account Res 39(3):565–582 CrossRef Gilson S, Healy P, Noe C, Palepu K (2001) Analyst specialization and conglomerate stock breakups. J Account Res 39(3):565–582 CrossRef
go back to reference Gompers P, Metrick A (2001) Institutional investors and equity prices. Quart J Econ 116(1):229–259 CrossRef Gompers P, Metrick A (2001) Institutional investors and equity prices. Quart J Econ 116(1):229–259 CrossRef
go back to reference Graham J, Harvey C, Rajgopal S (2005) The economic implications of corporate financial reporting. J Account Econ 40(1–3):3–73 CrossRef Graham J, Harvey C, Rajgopal S (2005) The economic implications of corporate financial reporting. J Account Econ 40(1–3):3–73 CrossRef
go back to reference Green TC, Jame R, Markov S, Subasi M (2014a) Access to management and the informativeness of analyst research. J Financ Econ 114(2):239–255 CrossRef Green TC, Jame R, Markov S, Subasi M (2014a) Access to management and the informativeness of analyst research. J Financ Econ 114(2):239–255 CrossRef
go back to reference Green TC, Jame R, Markov S, Subasi M (2014b) Broker-hosted investor conferences. J Account Econ 58(1):142–166 CrossRef Green TC, Jame R, Markov S, Subasi M (2014b) Broker-hosted investor conferences. J Account Econ 58(1):142–166 CrossRef
go back to reference Greenwood R, Thesmar D (2011) Stock price fragility. J Financ Econ 102(3):471–490 CrossRef Greenwood R, Thesmar D (2011) Stock price fragility. J Financ Econ 102(3):471–490 CrossRef
go back to reference He J, Plumlee MA (2020) Measuring disclosure using 8-K filings. Rev Acc Stud 25:903–962 CrossRef He J, Plumlee MA (2020) Measuring disclosure using 8-K filings. Rev Acc Stud 25:903–962 CrossRef
go back to reference Healy P, Palepu K (2001) Information asymmetry, corporate disclosure, and the capital markets: a review of the empirical disclosure literature. J Account Econ 31(1–3):405–440 CrossRef Healy P, Palepu K (2001) Information asymmetry, corporate disclosure, and the capital markets: a review of the empirical disclosure literature. J Account Econ 31(1–3):405–440 CrossRef
go back to reference Healy P, Hutton A, Palepu K (1999) Stock performance and intermediation changes surrounding increases in disclosure. Contemp Account Res 16(3):485–520 CrossRef Healy P, Hutton A, Palepu K (1999) Stock performance and intermediation changes surrounding increases in disclosure. Contemp Account Res 16(3):485–520 CrossRef
go back to reference Hirst DE, Koonce L, Venkataraman S (2008) Management earnings forecasts: a review and framework. Account Horiz 22(3):315–338 CrossRef Hirst DE, Koonce L, Venkataraman S (2008) Management earnings forecasts: a review and framework. Account Horiz 22(3):315–338 CrossRef
go back to reference Hite G, Owers J (1983) Security price reactions around corporate spin-off announcements. J Financ Econ 12(4):409–436 CrossRef Hite G, Owers J (1983) Security price reactions around corporate spin-off announcements. J Financ Econ 12(4):409–436 CrossRef
go back to reference Hong H, Huang M (2005) Talking up liquidity: insider trading and investor relations. J Financ Intermed 14(1):1–31 CrossRef Hong H, Huang M (2005) Talking up liquidity: insider trading and investor relations. J Financ Intermed 14(1):1–31 CrossRef
go back to reference Karolyi GA, Kim D, Liao RC (2020) The theory and practice of investor relations: a global perspective. Manage Sci 66(10):4746–4771 CrossRef Karolyi GA, Kim D, Liao RC (2020) The theory and practice of investor relations: a global perspective. Manage Sci 66(10):4746–4771 CrossRef
go back to reference Kimbrough M, Louis H (2011) Voluntary disclosure to influence investor reactions to merger announcements: an examination of conference calls. Account Rev 86(2):637–667 CrossRef Kimbrough M, Louis H (2011) Voluntary disclosure to influence investor reactions to merger announcements: an examination of conference calls. Account Rev 86(2):637–667 CrossRef
go back to reference King M, Segal D (2009) The long-term effects of cross-listing, investor recognition, and ownership structure on valuation. Rev Financ Stud 22(6):2393–2421 CrossRef King M, Segal D (2009) The long-term effects of cross-listing, investor recognition, and ownership structure on valuation. Rev Financ Stud 22(6):2393–2421 CrossRef
go back to reference Kirk M, Markov S (2016) Come on over: analyst/investor days as a disclosure medium. Account Rev 91(6):1725–1750 CrossRef Kirk M, Markov S (2016) Come on over: analyst/investor days as a disclosure medium. Account Rev 91(6):1725–1750 CrossRef
go back to reference Kirk M, Vincent J (2014) Professional investor relations within the firm. Account Rev 89(4):1421–1452 CrossRef Kirk M, Vincent J (2014) Professional investor relations within the firm. Account Rev 89(4):1421–1452 CrossRef
go back to reference Lamont O, Thaler R (2003) Can the market add and subtract? Mispricing in tech stock carveouts. J Polit Econ 111(2):227–268 CrossRef Lamont O, Thaler R (2003) Can the market add and subtract? Mispricing in tech stock carveouts. J Polit Econ 111(2):227–268 CrossRef
go back to reference Lang M, Lundholm R (1996) Corporate disclosure policy and analyst behavior. Account Rev 71(4):467–492 Lang M, Lundholm R (1996) Corporate disclosure policy and analyst behavior. Account Rev 71(4):467–492
go back to reference Lang L, Stulz R (1994) Tobin’s q, corporate diversification, and firm performance. J Polit Econ 102(6):1248–1280 CrossRef Lang L, Stulz R (1994) Tobin’s q, corporate diversification, and firm performance. J Polit Econ 102(6):1248–1280 CrossRef
go back to reference Lee LF, Hutton A, Shu S (2015) The role of social media in the capital market: evidence from consumer product recalls. J Account Res 53(2):367–404 CrossRef Lee LF, Hutton A, Shu S (2015) The role of social media in the capital market: evidence from consumer product recalls. J Account Res 53(2):367–404 CrossRef
go back to reference Lerman A, Livnat J (2010) The new form 8-K disclosures. Rev Acc Stud 15(4):752–778 CrossRef Lerman A, Livnat J (2010) The new form 8-K disclosures. Rev Acc Stud 15(4):752–778 CrossRef
go back to reference Li F (2010) The information content of forward-looking statements in corporate filings: a naïve Bayesian machine learning approach. J Account Res 48(5):1049–1102 CrossRef Li F (2010) The information content of forward-looking statements in corporate filings: a naïve Bayesian machine learning approach. J Account Res 48(5):1049–1102 CrossRef
go back to reference Loughran T, McDonald B (2011) When is a liability not a liability? Textual analysis, dictionaries and 10-Ks. J Financ 66(1):35–65 CrossRef Loughran T, McDonald B (2011) When is a liability not a liability? Textual analysis, dictionaries and 10-Ks. J Financ 66(1):35–65 CrossRef
go back to reference Matsumoto D, Pronk M, Roelofsen E (2011) What makes conference calls useful? The information content of managers’ presentations and analysts’ discussion sessions. Account Rev 86(4):1383–1414 CrossRef Matsumoto D, Pronk M, Roelofsen E (2011) What makes conference calls useful? The information content of managers’ presentations and analysts’ discussion sessions. Account Rev 86(4):1383–1414 CrossRef
go back to reference Maxwell W, Rao R (2003) Do spin-offs expropriate wealth from bondholders? J Financ 58(5):2087–2108 CrossRef Maxwell W, Rao R (2003) Do spin-offs expropriate wealth from bondholders? J Financ 58(5):2087–2108 CrossRef
go back to reference McConnell J, Ovtchinnikov A (2004) Predictability of long-term spinoff returns. J Invest Manag 2(3):35–44 McConnell J, Ovtchinnikov A (2004) Predictability of long-term spinoff returns. J Invest Manag 2(3):35–44
go back to reference McConnell J, Ozbilgin M, Wahal S (2001) Spin-offs, ex ante. J Bus 74(2):245–280 CrossRef McConnell J, Ozbilgin M, Wahal S (2001) Spin-offs, ex ante. J Bus 74(2):245–280 CrossRef
go back to reference McConnell J, Sibley S, Xu W (2015) The stock price performance of spin-off subsidiaries, their parents, and the spin-off ETF, 2001–2013. J Portf Manag 42(1):143–152 CrossRef McConnell J, Sibley S, Xu W (2015) The stock price performance of spin-off subsidiaries, their parents, and the spin-off ETF, 2001–2013. J Portf Manag 42(1):143–152 CrossRef
go back to reference McNeil C, Moore W (2005) Dismantling internal capital markets via spinoff: effects on capital allocation efficiency and firm valuation. J Corp Finan 11(1–2):253–275 CrossRef McNeil C, Moore W (2005) Dismantling internal capital markets via spinoff: effects on capital allocation efficiency and firm valuation. J Corp Finan 11(1–2):253–275 CrossRef
go back to reference Mehran H, Peristiani S (2010) Financial visibility and the decision to go private. Rev Financ Stud 23(2):519–547 CrossRef Mehran H, Peristiani S (2010) Financial visibility and the decision to go private. Rev Financ Stud 23(2):519–547 CrossRef
go back to reference Merton R (1987) A simple model of capital market equilibrium with incomplete information. J Financ 42(3):483–510 CrossRef Merton R (1987) A simple model of capital market equilibrium with incomplete information. J Financ 42(3):483–510 CrossRef
go back to reference Miles J, Rosenfeld J (1983) The effect of voluntary spin-off announcements on shareholder wealth. J Financ 38(5):1597–1606 CrossRef Miles J, Rosenfeld J (1983) The effect of voluntary spin-off announcements on shareholder wealth. J Financ 38(5):1597–1606 CrossRef
go back to reference Nagel S (2005) Trading styles and trading volume. Unpublished working paper. University of Chicago, Chicago Nagel S (2005) Trading styles and trading volume. Unpublished working paper. University of Chicago, Chicago
go back to reference Neukirchen D, Engelhardt N, Krause M, Posch P (2022) The value of (private) investor relations during the COVID-19 crisis. J Bank Financ, forthcoming Neukirchen D, Engelhardt N, Krause M, Posch P (2022) The value of (private) investor relations during the COVID-19 crisis. J Bank Financ, forthcoming
go back to reference Palepu K (1985) Diversification strategy, profit performance, and the entropy measure. Strateg Manag J 6(3):239–255 CrossRef Palepu K (1985) Diversification strategy, profit performance, and the entropy measure. Strateg Manag J 6(3):239–255 CrossRef
go back to reference Parrino R (1997) Spin-offs and wealth transfers: the Marriott case. J Financ Econ 43(2):241–274 CrossRef Parrino R (1997) Spin-offs and wealth transfers: the Marriott case. J Financ Econ 43(2):241–274 CrossRef
go back to reference Patro S (2008) The evolution of ownership structure of corporate spin-offs. J Corp Finan 14(5):596–613 CrossRef Patro S (2008) The evolution of ownership structure of corporate spin-offs. J Corp Finan 14(5):596–613 CrossRef
go back to reference Reiter N (2021) Investor communication and the benefits of cross-listing. J Account Econ 71(1):101356 CrossRef Reiter N (2021) Investor communication and the benefits of cross-listing. J Account Econ 71(1):101356 CrossRef
go back to reference Schipper K, Smith A (1983) Effects of recontracting on shareholder wealth: the case of voluntary spin-offs. J Financ Econ 12(4):437–467 CrossRef Schipper K, Smith A (1983) Effects of recontracting on shareholder wealth: the case of voluntary spin-offs. J Financ Econ 12(4):437–467 CrossRef
go back to reference Schoenfeld J (2017) The effect of voluntary disclosure on stock liquidity: new evidence from index funds. J Account Econ 63(1):51–74 CrossRef Schoenfeld J (2017) The effect of voluntary disclosure on stock liquidity: new evidence from index funds. J Account Econ 63(1):51–74 CrossRef
go back to reference Seward J, Walsh J (1996) The governance and control of voluntary corporate spin-offs. Strateg Manag J 17(1):25–39 CrossRef Seward J, Walsh J (1996) The governance and control of voluntary corporate spin-offs. Strateg Manag J 17(1):25–39 CrossRef
go back to reference Solomon D, Soltes E (2015) What are we meeting for? The consequences of private meetings with investors. J Law Econ 58(2):325–355 CrossRef Solomon D, Soltes E (2015) What are we meeting for? The consequences of private meetings with investors. J Law Econ 58(2):325–355 CrossRef
go back to reference Soltes E (2014) Private interaction between firm management and sell-side analysts. J Account Res 52(1):245–272 CrossRef Soltes E (2014) Private interaction between firm management and sell-side analysts. J Account Res 52(1):245–272 CrossRef
go back to reference Tasker S (1998) Bridging the information gap: quarterly conference calls as a medium for voluntary disclosure. Rev Acc Stud 3(1):137–167 CrossRef Tasker S (1998) Bridging the information gap: quarterly conference calls as a medium for voluntary disclosure. Rev Acc Stud 3(1):137–167 CrossRef
go back to reference Verrecchia R (2001) Essays on disclosure. J Account Econ 32(1–3):97–180 CrossRef Verrecchia R (2001) Essays on disclosure. J Account Econ 32(1–3):97–180 CrossRef
go back to reference Vijh A (1994) The spinoff and merger ex-date effects. J Financ 49(2):581–609 CrossRef Vijh A (1994) The spinoff and merger ex-date effects. J Financ 49(2):581–609 CrossRef
go back to reference Villalonga B (2004a) Diversification discount or premium? New evidence from the business information tracking series. J Financ 59(2):479–506 CrossRef Villalonga B (2004a) Diversification discount or premium? New evidence from the business information tracking series. J Financ 59(2):479–506 CrossRef
go back to reference Villalonga B (2004b) Does diversification cause the “diversification discount”? Financ Manag 33(2):5–27 Villalonga B (2004b) Does diversification cause the “diversification discount”? Financ Manag 33(2):5–27
go back to reference Whited T (2001) Is it inefficient investment that causes the diversification discount? Journal of Finance 56(5):1667–1691 CrossRef Whited T (2001) Is it inefficient investment that causes the diversification discount? Journal of Finance 56(5):1667–1691 CrossRef
go back to reference Wruck E, Wruck K (2002) Restructuring top management: evidence from corporate spinoffs. J Law Econ 20(S2):S176–S218 Wruck E, Wruck K (2002) Restructuring top management: evidence from corporate spinoffs. J Law Econ 20(S2):S176–S218
Metadata
Title
Corporate communication and shareholder base retention: evidence from spin-offs
Author
Ryan P. McDonough
Publication date
30-01-2023
Publisher
Springer US
Published in
Review of Quantitative Finance and Accounting / Issue 4/2023
Print ISSN: 0924-865X
Electronic ISSN: 1573-7179
DOI
https://doi.org/10.1007/s11156-023-01129-4

Other articles of this Issue 4/2023

Review of Quantitative Finance and Accounting 4/2023 Go to the issue