The economics of parent-subsidiary mergers:: an empirical analysis

We examine parent-subsidiary mergers, transactions that do not entail arm's length bargaining or a change in control. These mergers are typically followed by considerable restructuring of subsidiaries. Minority and parent returns are not significantly different from returns at third party buyou...

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Bibliographic Details
Published inJournal of financial economics Vol. 49; no. 2; pp. 255 - 279
Main Authors Slovin, Myron B., Sushka, Marie E.
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.08.1998
Elsevier Sequoia S.A
Subjects
Acquisitions & mergers
Arms length transactions
Economic models
Financial economics
Majority control
Mergers
Minority shareholders
Minority stockholders
Parent companies
Parent-subsidiary mergers
Rates of return
Studies
Subsidiaries
United States > US
Parent-subsidiary mergers
G34
G32
Majority control
Minority shareholders
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Summary:We examine parent-subsidiary mergers, transactions that do not entail arm's length bargaining or a change in control. These mergers are typically followed by considerable restructuring of subsidiaries. Minority and parent returns are not significantly different from returns at third party buyouts of parent-controlled subsidiaries, transactions that entail arm's length negotiations and a change in control. Buyer returns are negative, consistent with overbidding. We conclude that parent-subsidiary mergers facilitate corporate restructuring, foster the reallocation of resources toward higher valued uses, and increase value for both parent and subsidiary.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0304-405X
1879-2774
DOI:10.1016/S0304-405X(98)00024-5