Spinoffs and Information Asymmetry

• In Event: Financial Reporting Disclosures, Sustanability and Related Topics

Abstract

Prior research shows information asymmetry reduces after spinoffs. We use a larger sample to retest the theory and find that the reduction of information asymmetry is mainly driven by outliers. If outliers are removed, information asymmetry level does not change significantly around spinoff events. This could be explained by the fact that although firms provide more financial statements and more stock prices, one for parent and one for subsidiary, after spinoffs, they also lose partial information diversification advantage.

Author

• Qiongyao Zhang, SUNY-Binghamton