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

See all articles by Vladimir A. Atanasov

Vladimir A. Atanasov

William and Mary - Raymond A. Mason School of Business

Audra L. Boone

Texas Christian University - M.J. Neeley School of Business; European Corporate Governance Institute (ECGI)

David Haushalter

Pennsylvania State University - Mary Jean and Frank P. Smeal College of Business Administration

Date Written: June 1, 2008

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 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

Atanasov, Vladimir A. and Boone, Audra and Haushalter, David, Is There Shareholder Expropriation in the U.S.? An Analysis of Publicly-Traded Subsidiaries (June 1, 2008). Journal of Financial and Quantitative Analysis (JFQA), Vol. 45, No. 1, 2010, Available at SSRN: https://ssrn.com/abstract=686376 or http://dx.doi.org/10.2139/ssrn.686376

Vladimir A. Atanasov

William and Mary - Raymond A. Mason School of Business ( email )

P.O. Box 8795
Williamsburg, VA 23187-8795
United States

Audra Boone (Contact Author)

Texas Christian University - M.J. Neeley School of Business ( email )

Fort Worth, TX 76129
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

David Haushalter

Pennsylvania State University - Mary Jean and Frank P. Smeal College of Business Administration ( email )

University Park, PA 16802
United States
814-863-7969 (Phone)
814-865-3362 (Fax)

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