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Is There Shareholder Expropriation in the United States? An Analysis of Publicly Traded Subsidiaries

Published online by Cambridge University Press:  11 January 2010

Vladimir Atanasov ,
Audra Boone  and
David Haushalter
Vladimir Atanasov
Affiliation:
College of William and Mary, Mason School of Business, PO Box 8795, Williamsburg, VA 23187. [email protected]
Audra Boone
Affiliation:
University of Kansas, School of Business, 1300 Sunnyside Ave., Lawrence, KS 66045. [email protected]
David Haushalter
Affiliation:
Pennsylvania State University, Smeal College of Business, 343 Business Bldg., University Park, PA 16802. [email protected]
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Abstract

This paper examines the relation between the performance and valuations of publicly traded subsidiaries in the United States and the ownership stake of their parent companies. Cross-sectional and time-series tests demonstrate that subsidiaries of parents that own a substantial minority stake exhibit negative peer-adjusted operating performance and are valued at a 23% median discount relative to peers. In contrast, majority-owned and fully divested subsidiaries show no abnormal performance or valuations. The results of our study indicate that the association between parent ownership and subsidiary performance is nonlinear and that some parents behave opportunistically toward their publicly traded subsidiaries.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 45 , Issue 1 , February 2010 , pp. 1 - 26
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2010

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