Organizational Restructuring, Equity Valuation, and Limited Partnerships

This research investigates common equity price reactions to announcements of limited partnerships (LPs) in which parent firms retain general partnership interests. On average, prices react positively to these announcements, which suggests that creating LPs is a marginally effective method of separat...

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Bibliographic Details
Published inThe Financial review (Buffalo, N.Y.) Vol. 26; no. 4; pp. 535 - 546
Main Authors Christensen, Donald G., Christensen, Linda F.
Format Journal Article
LanguageEnglish
Published Oxford, UK Blackwell Publishing Ltd 01.11.1991
Subjects
Changes
Effects
Limited partnerships
Organizational structure
Statistical analysis
Stock prices
Studies
United States > US
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Summary:This research investigates common equity price reactions to announcements of limited partnerships (LPs) in which parent firms retain general partnership interests. On average, prices react positively to these announcements, which suggests that creating LPs is a marginally effective method of separately financing investment projects. This study provides evidence that the systematic variation in prediction errors across announcements is positively related to the percent ownership retained in the LP by the parent, which suggests that ownership retention signals information about the value of the LP, the costs of controlling the LP, and the amount of external financing needed for the LP.
Bibliography:ark:/67375/WNG-9NNMTF0H-Q
ArticleID:FIRE535
istex:EC28B33F4E718E54C38B1A503E21AAE51A746D2D
ISSN:0732-8516
1540-6288
DOI:10.1111/j.1540-6288.1991.tb00395.x