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Securityholder Taxes and Corporate Restructurings

Published online by Cambridge University Press:  06 April 2009

David C. Mauer  and
Wilbur G. Lewellen
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Abstract

Previous studies have found that positive abnormal stock returns are associated with corporate spin-offs and divestitures. Using a simplified model of the process of investor tax trading, we show that an improvement in the value of the tax-timing option component of securities prices is a likely contributing factor to those abnormal returns. The analysis indicates that the same phenomenon also may be part of the explanation for the generally higher returns observed for spin-offs than for divestitures, both when leverage is and is not present in the restructuring transactions.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 25 , Issue 3 , September 1990 , pp. 341 - 360
Copyright
Copyright © School of Business Administration, University of Washington 1990

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