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A sponsored spin-off takes place when an equity stake in a subsidiary is sold to an outside investor before going public. The stock return performance of a sample of 57 sponsored spin-offs from 1994 to 2005 is significantly negative over a three-year period following the spin-off date. The parent firms' stock performance for the year preceding (following) the spin-off date are below average (average) suggesting that their earlier performances were adversely affected by their subsidiaries and motivated the parents to spin them off We also find that parent firms underinvest in the subsidiary prior to the spin-off which could have motivated the subsidiary to seek outside funding sources before going public.

This paper presents estimates of the effect of voluntary divestiture announcements on shareholder wealth. The results show that both spin-off and sell-off announcements tend to have a positive influence on the stock prices of the divesting firms, and that the spin-offs \"outperform\" the sell-offs on the day of the event. We also find that the economic gains to the shareholders of the selling and acquiring firms are nearly identical, suggesting that the sell-off decision is perceived by both investor groups as a positive net present value (NPV) transaction.

We examine the long-run return performance of over 1,600 firms with reverse stock splits. These stocks record statistically significant negative abnormal returns over the three-year period following the month of the reverse split. The sample firms experience poor operating performances over the four years that include and follow the year of the reverse split, which suggests informational inefficiencies. Because these stocks have unique financial characteristics, we also show that they would be very difficult to sell short. Thus, arbitrageurs would be restricted in their ability to earn abnormal profits, even if they correctly anticipated a price decline.

This paper presents estimates of the effect of a voluntary spin-off announcement on shareholder wealth. The results show that spin-off announcements have a positive influence on stock prices and that the relative increase in share price is greater for large spin-offs than for small ones.

This paper provides evidence that an equity carve-out is usually the first stage of a two-stage process either to dispose of parent interest in a subsidiary or eventually re-acquire the subsidiary's publicly traded shares. Both the initial carve-out announcement and subsequent sell-off announcement yield, on average, significantly positive abnormal returns to parent shareholders. In contrast, the parent's price response to a re-acquisition of subsidiary shares is, on average, insignificantly positive. Both sell-off and re-acquisition announcements have a strong positive impact on subsidiary share prices. These gains, however, are offset by the subsidiaries' below-average return performance preceding the second event.

Section 512 defines \"service provider\" as \"a provider of online services or network access, or the operator of facilities therefor,\" which has been construed to include almost any Web site or other Internet-based entity.

An intriguing anomaly in recent market-based accounting research is that both the market and analysts appear not to recognize properly the time-series properties of quarterly earnings shocks. Bernard and Thomas (1990) and Freeman and Tse (1989) present evidence that the market underestimates the implications of previous period earnings for future earnings. Mendenhall (1991) and Abarbanell and Bernard (1991) find that analysts do not seem to utilize time-series information about earnings correctly when setting their forecasts. Specifically, these last two studies document a positive serial correlation in analysts' quarterly forecast errors and interpret this finding as analysts systematically underestimating the persistence of past earnings forecast errors in forecasting future earnings. The purpose of this article is to examine whether analysts properly recognize the time-series properties of annual earnings when setting their estimates of future earnings. Givoly (1985) investigates this issue and finds that analysts' forecasts of annual earnings per share (EPS) are unbiased and that prediction errors are not serially correlated. He concludes that forecasts are formed in an efficient manner. In contrast, this study finds that, on average, analysts set overly optimistic estimates of the next period's annual EPS and that forecast errors display significantly positive serial correlation. These results hold for short-term as well as for longer-term IBES consensus forecasts. Bias and positive serial correlation in forecast errors suggest that analysts do not properly recognize the time-series properties of earnings when setting expectations of future earnings. Studies show that, for any given year, earnings shocks have both permanent and transitory (i.e., mean-reverting) components (see, e.g., Brooks and Buckmaster 1976; Ou 1990; Ou and Penman 1989b) and that the level of earnings persistence varies across firm-years. We examine whether analysts are aware of the differences between permanent and temporary components in the previous year's earnings when predicting future earnings. The findings show that analysts are able to differentiate partially between permanent and temporary components in previous period earnings. We also find that the overestimation bias in forecasts is most pronounced for firms that recently experienced negative earnings. In contrast, the positive serial correlation is most evident for firms that had predominantly permanent earnings. These results suggest that the overestimation bias and serial correlation are not uniform across firms. To address the economic significance of our findings, estimates of bias and serial correlation in forecast errors are used to adjust existing forecasts. The accuracy of the adjusted forecasts are then compared to the unadjusted forecasts. A significant improvement in forecasting ability is found for the adjusted longer-term forecasts, as evidenced by a 12 percent improvement in the mean squared error. Further, the bias and serial correlation in the adjusted forecasts are significantly less than in the actual forecasts for both longer and short terms. These results further support the view that analysts do not utilize available information efficiently when setting forecasts.

Despite being well-settled as a matter of law, the issue of whether test protocols must be disclosed to parents continues to be a source of dispute between schools, school psychologists, and parents. To be sure, one of the reasons for this vampire-like existence is the imprecision of the questioners and questions. Moreover, professional guidance has been difficult to interpret and apply in specific situations. Still, given the fact that applicable law has been settled for many years, it is fair to wonder whether something else is driving the questions. This article attempts to accomplish three objectives: (1) provide a brief summary of applicable law; (2) state the questions that should be asked, with answers; and (3) suggest some easy practices for those \"in the trenches\" to avoid most the undesirable consequences. (Contains 38 footnotes.)

Since late 1993, nonfinancial corporations have used financial instruments that permit them to treat preferred-stock dividends as tax-deductible interest. Bank holding companies (BHCs), however, did not issue these trust-preferred securities (TPS) until 1996, when the Federal Reserve qualified them as Tier-1 capital. We delineate and test five, not mutually exclusive, hypotheses by: (1) analyzing the stock-market's reaction to the Fed's ruling and to TPS filings and (2) comparing BHCs that issued TPS with those that did not. We find that regulatory capital requirements, tax savings, and uninsured sources of funds had significant positive effects on BHCs' demand for capital and that the market responded favorably to TPS filings. Our event-study findings are contrary to prior empirical results in that we find a positive market reaction to equity offerings.