A central question in corporate finance has been about the optimal balance between both debt and equity financing when trying to determine the optimal capital structure of a new or existing firm. In this thesis, I investigate how the capital structure of the parent and carve-out company evolve following the carve-out itself. This investigation is a direct extension of Dittmar's (2004) work and contributes to the literature on the choice of a carve-out or spin-off. This leverage choice may be influenced by the parent corporation's need for cash, either to finance growth opportunities, to distribute cash to shareholders, or to repay debt (Michaely & Shaw, 1995). Using a sample of 102 subsidiaries that have completed a carve-out between the years of 1985 and 2001 , I find that carve-outs do not have higher debt levels than spinoffs as reported in Dittmar's (2004) study. I also find that the parent firms ' leverage does not decrease as predicted. Leverage actually increases during the three years following the carve-out. I have also found that cash constraints, collateral value, and the parent firms ' pre-debt level are positively related to leverage choice while the parent firms' precarve- out cash constraint is negatively correlated. However, there is no significance between leverage and firm size, growth opportunities, or profitability.

Chapter 1 of the dissertation investigates the firms' restructuring choice between minority carve-outs and tracking stocks using samples during 1990-2001. The extra compensation from the restructured units, the liquidity conditions, and the preservation of synergy are the significant factors determining a firm's restructuring decision. Additional compensation seems to be a major driving force behind restructuring via tracking stock. One year after the restructuring, the executive compensation of the tracking stock group increases by 241% compared to 32% for the carve-out sample. In spite of the significant increase in the compensation, the three-year buy-and-hold return for tracking stock parents is more negative than that of the carve-out parents. Thus, if the extra compensation was designed to align the interests of managers and shareholders, the goal did not materialize. The primary motive behind restructuring through carve-outs is to control the liquidity problem. Although the operating performance of the parents of either group does not improve three years after the restructuring, the long-term stock performance of carve-out parents improves when a restructured unit is less related to the parent. Chapter 2 of the dissertation compares the degree of overreaction between value stocks and growth stocks using the implied volatility from option prices. Applying Stein's (1989) mean reversion model and Heynen, Kemna, and Vorst's (1994) GARCH and EGARCH methods, I compare the theoretical and empirical measures of reaction of longterm options in respect to short-term options for the growth and the value portfolios, which are separately classified by price-to-book and price-to-earning ratios. The evidence suggests that growth portfolios largely overreact to a greater degree than the value portfolios assuming mean reversion, GARCH, and EGARCH models. The findings potentially explain why value stocks outperform growth stocks in the long run, lending support to overreaction as an explanation for the value effect.

In the absence of taxes and transactions costs, there can be no benefit to corporate reorganization from a financial standpoint, but ‘real world’ limitations and frictions do provide additional value that is gained through divestitures in terms of focus and financial flexibility. Herein, the corporate divestiture decision is analyzed to determine the motivation for a parent company either to cleave its offspring directly to the external capital market in an equity carve-out or to distribute the shares to the existing shareholders in a tax-free spin-off. Cash flow performance, asymmetric information, relative size of the divestiture, and relatedness of the parent’s and subsidiary’s operations are all found to contribute significantly to the divestiture decision. In Canada, an alternate form of security, known as the income trust unit, has become popular for corporate reorganizations, either through an initial public offering or as a conversion of shares. The flow-through structure of income trusts currently allows avoidance of corporate taxation to offer higher pre-tax returns to retail investors, in a market setting where yield is increasingly equated with value. To determine placement of these securities in the market, the risk of the income trust organizational form is analyzed and compared to the standard corporate form. Further, a number of publicly known characteristics of the income trusts can predict the relative risk of this type of investment. In recent ‘hot markets’ for these securities, proof is uncovered that unsuitable firms have been migrating to this sector, but valuation of the investments in this sector has remained fair and full. Although pending legislation will discontinue the tax-exempt status of income trusts in 2011, during their tenure these securities have improved the Canadian market. Based on the data analysis herein, all types of divestitures studied have been predicted to provide commensurate value with respect to risk depending on the nature of the subsidiary. / Thesis (Ph.D, Management) -- Queen's University, 2007-08-15 11:20:20.465

The first part of this dissertation examines the impact of financial development on different countries holdings of U.S securities. The difference between the US weight in the global market capitalization and the US weight in developed and developing countries is tested through a panel data analysis. We find that most countries tend to overweight their US debt portfolio which is strongly related to their financial market development. When holdings of US debts and equity are low, financial market development is high; in developing countries, holding less US equity in their portfolio causes country to get better financial development. In developed countries there is no causation effect; a simple negative relation between financial development and countries holding of US securities is observed and countries tend to hold relatively less US securities through years. The second part of this dissertation examines whether economic conditions, affect carve-outs frequency and returns. This paper investigates the effect of expansion and recession, and industry sectors on carve out issued in the US over 1982 to 2009. We find that the number of carve-outs is higher in expansion than recession. However, the cumulative abnormal returns are higher during recession which is explained by the higher adverse selection during this period. Further, we find that the difference of abnormal returns between expansion and recession is significant and we also observe that high-tech or non-high-tech industries that undertake carve-out have positive higher abnormal return during recession. Therefore, within a same industry sector, carve-out abnormal returns are impacted by the economy cycle. However difference of abnormal returns between industry sector, high-tech and non-high-tech industries, is not significant.

This dissertation consists of three essays examining the relation between corporate governance and firm performance. The theme of this study is that the widely documented long-term underperformance in equity carve-outs can be partly explained by weak corporate governance. The first essay presented in Chapter 2 explores the effect of shareholder-rights protection on the performance of a sample of firms that initiated a carve-out during the period 1983-2004. Using the Gompers, Ishii, and Metrick (2003) index and Bebchuk, Cohen, and Ferrell (2004) entrenchment index, as proxies for the quality of shareholder-rights protection, I provide evidence that firms with better shareholder rights protection outperform those with weaker rights protection. Results indicate that the weaker the rights protection, the greater the degree of underperformance. Overall, the results are robust to measures of firm performance and to model specification. The second essay presented in Chapter 3 examines the relation between firm performance and board structure. In particular, I study how board size, board independence, and CEO duality influence firm performance. I find that board size for non-financial firms is negatively related to firm performance but positively associated with performance for financial firms. Board independence is positively related to firm performance and CEO duality is negatively associated with performance for both financial and non-financial firms. These results are robust to various measures of firm performance. The conflicting evidence on board size, between financials and non-financials, seems to suggest that the scope and complexity of a firm.s operations drives board size. The third essay presented in Chapter 4 investigates corporate ownership and firm performance. I focus on insider ownership, outside blockholder ownership, and ownership concentration. Results show that insider ownership is negatively related to firm performance even at low levels of insider ownership levels. It is plausible that the combination of parent ownership and management ownership in the subsidiary exacerbate the entrenchment effect thus overwhelming the incentive alignment effects that theory posits. I document a positive relation between outside blockholder ownership and firm performance. And finally, I show that the level of ownership concentration increases (decreases) in anticipation of positive (negative) changes in firm performance.

追蹤股係資產重組方式的一種，近年來在美國的證券市場增加許多的發行案例，追蹤股是針對多角化企業特定部門發行不同權利義務的普通股，表彰該特定企業的營運績效，提供給投資人更明確的投資評價，進而提升企業整體的價值。追蹤股的起源係於1984年General Motors在取得Ross Perot’s Electronic Data System後發行首創的追蹤股，雖然陸續有發行之個案，但追蹤股的發行熱潮主要集中於1998年至2000年，包括AT&T、Sprint Corp、Quantum Corp.及Disney等企業，且部分發行企業發行一種以上的追蹤股，因追蹤股可依發行企業的需求制定不同的投票權、轉換權、股利分配政策等，提供給投資者相當多的選擇，顯示追蹤股對企業的籌資或購併提供了新的工具。 由於追蹤股的發行案例較其他資產重組的方式(資產分拆及權益分割)相對較少，因此國外探討此專題的文獻亦不多見，國內目前亦無相關研究。故本研究的主要內容包括資產重組方式的分析及可能的考量因素，並說明追蹤股的起源、特性及優缺點，進而探討追蹤股發行時的宣告效果，觀察其累計異常報酬的顯著性，且驗證累計異常報酬與發行企業市值及市價淨值比的關係。 為提供國內研究者更清楚的了解追蹤股發行全貌，本研究將1998年在美國證券市場發行的Sprint Corp的個案，針對發行的目的、發行架構、該普通股的權利義務及可能的風險等項目加以分析研究。最後以模擬國內上市公司—中華電信發行追蹤股的可行性，提供國內主管機關作為未來研究新金融商品的建議及參考。

När frågan om möjligheten att patentera nya användningsområden för redan kända läkemedel aktualiserades under det Europeiska patentsystemet, kunde två hinder identifieras. Dels är den aktiva substansen i sig inte ny och dessutom förbjuder patentsystemet uttryckligen patent på medicinska förfaranden för diagnostisering eller terapeutisk och kirurgisk behandling. Genom både rättspraxis och lagstiftning har man dock försökt kringgå dessa hinder och till följd av den uttryckliga bestämmelsen om patent på den så kallade andra medicinska indikationen som EPC 2000 tillhandahåller, kan dess patenterbarhet inte längre ifrågasättas. Med anledning av den speciella karaktär som kravformuleringen för dessa patent åtnjuter och till följd av den snäva tolkning av kravformuleringen som den sparsamma praxis på detta område återspeglar, kan det däremot ifrågasättas om inte kraven för dess upprätthållande är alltför långtgående. Det utgör särskilt ett problem när läkemedelstillverkare använder möjligheten att genom "skinny labelling" utesluta patentskyddade indikationer från produktinformationen, för att kunna introducera generiska läkemedel för icke-patentskyddade indikationer på marknaden. Två motstridiga avgöranden som nyligen meddelats i Storbritannien respektive Nederländerna, vilka särskilt behandlar frågan om intrång i förhållande till "skinny labelling", återspeglar det oklara rättsläge som detta rättsområde präglas av. I Sverige kompliceras intrångsfrågan ytterligare av frågan om i vilken utsträckning dessa patent kan upprätthållas till följd av bestämmelser i folkhälsolagstiftningen om generisk substitution. Enkelt förklarat medför dessa bestämmelser att billiga generikaläkemedel, som enbart innehar försäljningsgodkännande för icke-patentskyddade indikationer, byts ut på apoteken mot originalläkemedel, oavsett för vilken indikation läkemedlet förskrivits. I praktiken innebär det att dessa läkemedelskopior även expedieras för patentskyddade indikationer. För att lösa den problematik som regelverket orsakar och till följd av de höga krav som i praxis tycks ställas upp för upprätthållandet av patent på den andra medicinska indikationen, anser författaren att lagstiftaren bör se över hur den svenska folkhälsolagstiftningen och det Europeiska patentsystemet bättre kan samspela. / Two obstacles could be identified when the question of granting patent protection for second medical use of known pharmaceutical products arose in the European patent system. On one hand, the active substance in itself is not new and on the other hand, the system explicitly prohibit method claims for treatment by surgery or therapy and diagnostic methods. However, these barriers have been circumvent in case law and legislation and due to the express provision of second medical use patents in the EPC 2000, its patentability is no longer to be questioned. Due to the special character of second medical use claims and as a result of the narrow interpretation that the sparse case law in this area reflects, it may however be questioned whether the requirement of its enforcement is far to excessive. This is particularly a problem when generic manufacturers uses the possibility of "skinny labelling", in order to exclude patented indications from the product information. As recently announced in the UK and the Netherlands, two conflicting decisions that specifically addresses the issue of patent infringement on second medical use patents in relation to "skinny labelling", reflects the legal uncertainty that characterizes this area of ​​law. In the Swedish context, the issue of enforcement of second medical use patents is further complicated as a result of mandatory provisions on generic substitution. In simple terms, these provisions causes inexpensive generic versions, which solely obtains marketing approval for off-patent indications, to exchange original pharmaceuticals at pharmacies regardless of the indication the drug has been prescribed. In practice, this means that these generic versions will also be dispensed for patented indications. In order to solve the problems that this regulatory framework causes and as a consequence of the high demands set out for the enforcement of second medical use patents, the author believes that it is advisable that the legislator performs a review on how the Swedish public health legislation and the European patent system better can interact on this issue.

Nous étudions l’évaluation, l’information et les perspectives industrielles lors des scissions de filiales par introduction en Bourse (ECO). Dans notre première étude, nous estimons les effets de richesse aux différentes étapes d’une ECO et leur lien sur les rentabilités boursières anormales de la société mère de la filiale. Nous trouvons que c’est la période de construction du livre d’ordres de l’introduction en bourse qui permet au marché financier de mieux estimer les effets de richesse positifs pour la société mère. Dans notre second travail, nousavançons que les ECO sont effectuées dans les secteurs industriels où les firmes présentent des opportunités de croissance plus faibles en moyenne. Nous démontrons que les industries concernées par des ECO ont des performances opérationnelles (mesurées par la rentabilité d’exploitation, les liquidités générées et la margeopérationnelle) plus faibles. Nous montrons également que les fusions acquisitions réalisées dans les industries où une ECO a eu lieu durant les trois années précédentes créent moins de valeur pour l’offreur que les fusions acquisitions qui ne sont pas concernées par une ECO. La dernière étude de cette thèse analyse l’impact d’une ECO sur la divergence d’estimations des analystes financiers et sur le nombre d’analystes suivants la société mère. Nous trouvons que la divergence d’estimations et le nombre d’analystes augmentent après une ECO. / We study the valuation, information and industry perspectives of equity carve-outs. In our first paper, we study the wealth effect of equity carve-outs and its relationship with the abnormal returns to the parent firm. Using thisrelationship we find that during book-building period of equity carve-out, the returns to the parent firm can be used to pre-empt the wealth effect of equity carve-out. In our second paper, we argue that equity carve-outs, on average, are carried out in industries, where opportunities are low. We find that these industries have low operating performance, gauged on profitability, cash flow and profit margin compared to industries where there are no carve-outs. In addition to this evidence, we find that the merger and acquisition activities, in which targetsare in industries where carve-out activities happened in last three years before the M&A activity, bidders have less value created compared to mergers where the target industry has no carve-out activity. In our third paper, we analyze the impact of carve-outs on the divergence of belief and the number of analysts following the firm. We find that divergence of belief increases after a carve-out and number of analysts following the firm increases, also.