The Effect of Corporate Break-ups on Information Asymmetry: A Market Microstructure AnalysisFlorian Bardong, Söhnke Bartram and Pradeep K. Yadav MPRA Paper from University Library of Munich, Germany Abstract: This paper investigates the information environment during and after a corporate break-up utilizing direct measures of information asymmetry developed in the market microstructure literature. The analysis is based on all corporate break-ups in the United States in the period 1995-2005. The results document that information asymmetry declines significantly as a result of a break-up. However, this reduction takes place not at the time of its announcement or its completion, but after it has been fully consummated. At the same time, not all investors are equally affected, but informed investors who generate private information by skilled analysis of public information come to play a more important role compared to traditional corporate insiders. This might explain why financial advisors promote break-ups among their corporate clients, as they are likely beneficiaries. The positive stock-market reaction to break-up announcements is significantly related to reductions in insider-related information asymmetry, indicating that the advantage of skilled information analysts does not offset the overall improvement in the information environment due to a break-up. Keywords: Spin-off; Divestiture; Information asymmetry (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:13155 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
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