On average, equity carve-outs have increased shareholder wealth. What are some potential explanations for this phenomenon?

Category:

On average, equity carve-outs have increased shareholder wealth. What are some potential explanations for this phenomenon?

0
0

On average, equity carve-outs have increased shareholder wealth. What are some potential explanations for this phenomenon?

Explanation & AnswerSolution by a verified expert

Verified Answer

Equity carve outs have increased shareholder wealth in the following ways:

Separation of subsidiary units from the parent company helps to diversify the operations of the business as both the companies can focus on their respective activities to achieve the goal effectively. Thus, resulting in greater profitability and higher profits will eventually increase the wealth of the shareholders.
Separation of subsidiary companies makes it easier for the investors to analyse the investment proposals in the subsidiary company. Better analysis and investments will increase the capital which the company can use to invest in profitable projects, rising profits increase the wealth of the company as well as shareholders.
When making a subsidiary company public, it helps to trade its securities on a stock exchange and builds its corporate image separate from that of the parent company. The built image helps in maintaining wealth of shareholders.

Purchase this answer to view it. $5
Login/Sign up for free, load your wallet instantly using PayPal or cards and purchase this solution to view it.


Get Help With Your Assignments

Place your order now and get a quality plagiarism-free paper via email.

Write My Paper For Me