Skip to: search, navigation, or content.


Indiana University Bloomington

Department of Finance

Have a Question?

Please feel free to contact us.

 

Advantage

Our top-ranked finance faculty are authors of leading textbooks.

Research and Publications

Journal Articles

Tracking Stock or Spin-off? Determinants of Choice

2008, Financial Management

A. Danielova

Abstract

I examine the roles of valuable internal capital markets, cross-subsidization, and insider ownership as determinants of choice between tracking stock and spin-offs in corporate equity restructuring. I show that conglomerates are more likely to choose tracking stock if they want to obtain some of the benefits offered by a spin-off, without loosing the potential for valuable internal capital markets. My results suggest that the market rewards firms with valuable internal capital markets that opt for tracking stocks, and penalizes the possibility of consolidated tax treatments. The market also reacts more favorably to unanticipated tracking-stock announcements.

Citation

Danielova, A. (2008), "Tracking Stock or Spin-off? Determinants of Choice," Financial Management, 37 (1), 125-139.