| This dissertation covers two main areas of research. First, in the modern financial market, stand-alone IPOs are contrasted with equity carve-outs, i.e. new publicly traded companies created from subsidiary units of parent firms. Second, in the pre-WWII market, the origins of the German corporation are examined with regard to financing, ownership and control. These two research areas are covered in three parts.; The first part examines a parent firm's carve-out decision using a hand-collected sample of equity carve-outs in Germany. The results show that parent firm managers use carve-outs as financing instruments with relative cost advantages, financing past investment. The results further suggest that the carve-out decision is influenced by market timing on an industry level. Finally, the evidence shows that parent firm value is increasing in the reduction of ownership in the subsidiary.; The second part extends the first part by analyzing the market timing characteristics of stand-alone IPOs and equity carve-outs. It proposes a trade-off between market timing opportunities for carve-outs relative to stand-alone IPOs. I find negative abnormal long-term stock performance, and declining market-to-book ratios and operating performance for both offering types, evidence consistent with successful market timing. Differences in operating performance and market-to-book between stand-alone IPOs and equity carve-outs suggest that reputational concerns outweigh larger market timing opportunities for carve-outs due to internal capital markets of parent firms.; The third part attempts to answer the question why ownership of German corporations is quite different today from Anglo-American firms. To what extent is it attributable to regulation? Data of German corporations from 1870--1950 reveals, as in the UK, high stock market activity with firms issuing equity in preference to bank borrowing, and declining insider ownership. However, unlike in the UK, companies and banks emerged as the main shareholders. Investor protection was equally weak in Germany and the UK at the beginning of the 20th century and cannot therefore explain these differences. However investor protection reinforced the importance of banks in the new issuance process. |
