Organizational Restructuring, Equity Valuation, and Limited

Common equity price reactions to announcements of limited partnerships (LP) in which parent firms retain general partnership interests are examined. On average, prices react positively to these announcements, which suggests that creating LPs is a marginally effective way of separately financing inve...

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Bibliographic Details
Published inThe Financial review (Buffalo, N.Y.) Vol. 26; no. 4; p. 535
Main Authors Christensen, Donald G, Christensen, Linda F
Format Journal Article
LanguageEnglish
Published Knoxville 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:Common equity price reactions to announcements of limited partnerships (LP) in which parent firms retain general partnership interests are examined. On average, prices react positively to these announcements, which suggests that creating LPs is a marginally effective way of separately financing investment projects. Evidence is found 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.
ISSN:0732-8516
1540-6288