Do Tracking Stocks Reduce Information Asymmetries? an Analysis of Liquidity and Adverse Selection
نویسندگان
چکیده
A firm’s announcement that it intends to restructure based on tracking stock is usually associated with a positive stock price reaction, at least in the short run. Typically, this reaction is attributed to expected reductions in a diversification discount, through reduced agency costs or information asymmetries. We reinvestigate this latter hypothesis by focusing on the liquidity provided by market makers before and after a firm issues a tracking stock. Our results suggest that such restructurings are not effective at reducing information asymmetries. Rather, firms that issue tracking stocks exhibit less liquidity and greater adverse selection than comparable control firms. JEL Classifications: G14, G34
منابع مشابه
Do Tracking Stocks Reduce Informational Asymmetries? An Analysis of Liquidity and Adverse Selection
A firm’s announcement that it intends to restructure based on tracking stock is usually associated with a significantly positive stock price reaction, at least in the short-run. Typically, this reaction has been attributed to expected reductions in a diversification discount, via reduced agency costs and/or reduced informational asymmetries. The existing literature has investigated this latter ...
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