Is There Shareholder Expropriation in the U.S.? An Analysis of Publicly-Traded Subsidiaries
51 Pages Posted: 19 Mar 2005 Last revised: 21 Mar 2012
Date Written: June 1, 2008
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 in which the parent owns 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 do, in fact, behave opportunistically toward their publicly traded subsidiaries.
Keywords: ownership structure, expropriation, consolidation, equity carve-out
JEL Classification: G32, G34
Suggested Citation: Suggested Citation