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Asian Review of Financial Research, Vol., No..
pp.1314~1372
pp.1314~1372
Investor Disagreement on Corporate Spin-Offs News : Confluence of Trading Volume and Abnormal Return
Daewon Kim Fogelman College of Business and Economics The University of Memphis Memphis, TN
Chong Soo Pyun Fogelman College of Business and Economics The University of Memphis Memphis, TN
With a total of 235 sample firms covering from 1966 to 2009 we investigate the effect of thedifference of opinion on cross-sectional variations in abnormal returns of the firm ? the firm which experiences temporal surges in the demand for its stocks immediately following the announcement of a corporate spin off. The proxies for the measurements of difference of opinion are abstracted from trading volume and concomitant changes in abnormal returns. Our findings are: (i) The enhancement of value of the firm is the predominant motivation behind corporate spinoff ; (ii)the firm size effect is prominent in wealth gain in that small firms realize much greater post-spinoff value of the firm than large firms; (iii)Whether volumebased differences of investor opinionsare compared with those of the ¡°liquidity effects¡± or other proxy measures, such as ¡°analysts¡¯ earnings forecasts, ¡± ¡°abnormal return patterns¡± and ¡°ownership dispersions,¡± volume turnover statistics are the reliable proxy measure mirroring the heterogeneous investor reactions to a spinoff news.
Daewon Kim
Chong Soo Pyun
With a total of 235 sample firms covering from 1966 to 2009 we investigate the effect of thedifference of opinion on cross-sectional variations in abnormal returns of the firm ? the firm which experiences temporal surges in the demand for its stocks immediately following the announcement of a corporate spin off. The proxies for the measurements of difference of opinion are abstracted from trading volume and concomitant changes in abnormal returns. Our findings are: (i) The enhancement of value of the firm is the predominant motivation behind corporate spinoff ; (ii)the firm size effect is prominent in wealth gain in that small firms realize much greater post-spinoff value of the firm than large firms; (iii)Whether volumebased differences of investor opinionsare compared with those of the ¡°liquidity effects¡± or other proxy measures, such as ¡°analysts¡¯ earnings forecasts, ¡± ¡°abnormal return patterns¡± and ¡°ownership dispersions,¡± volume turnover statistics are the reliable proxy measure mirroring the heterogeneous investor reactions to a spinoff news.