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Published in: Journal of Economics and Finance 3/2022

16-06-2022

Ex-date variables and DIPO parent returns

Author: Thomas H. Thompson

Published in: Journal of Economics and Finance | Issue 3/2022

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Abstract

We examine the extent to which divestiture IPO (DIPO) parent announcement and ex-date market-adjusted returns reflect public information for 57 DIPO parents for the period 1988–2020. We evaluate four hypotheses related to DIPO parents: partial price adjustment, overhang, managerial discretionary, and leaning against the wind. To test these hypotheses we use four primary variables: the percentage of the subsidiary retained by the parent, filing range adjustments, the percentage of the offering used to pay dividends to or repay parents (PFUND), and the CBOE Volatility Index (VIX) to predict initial returns. We show that 9.59%-27.91% of the variation in market-adjusted DIPO parent returns can be predicted using public information known prior to the offer date.

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Footnotes
1
Underpricing is the percentage change in price from the initial offering price to the first closing price.
 
2
Compustat defines ROA as net income divided by average assets.
 
3
Loughran and Ritter classify Technology firms with the following four-digit SIC codes: 3571, 3572, 3575, 3577, 3578, 3661, 3663, 3669, 3671, 3672, 3674, 3675, 3677, 3678, 3679, 3812, 3823, 3825, 3826, 3827, 3829, 3841,3845, 4812, 4813, 4899, 7371, 7372, 7373, 7374, 7375, 7378, and 7379.
 
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Metadata
Title
Ex-date variables and DIPO parent returns
Author
Thomas H. Thompson
Publication date
16-06-2022
Publisher
Springer US
Published in
Journal of Economics and Finance / Issue 3/2022
Print ISSN: 1055-0925
Electronic ISSN: 1938-9744
DOI
https://doi.org/10.1007/s12197-022-09585-9

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