corporatism and unemployment in the 1980s and 1990s a number of studies have found an association between corporatist institutions and low unemployment in the 1970s and or 1980s three gaps in our understanding of corporatism s labor market effects are addressed here 1 which of the two principal forms of corporatism corporatist wage setting or union participation in economic policymaking or both generates these effects 2 what are the causal mechanisms 3 did these effects continue in the 1990s in the face of globalization restrictive monetary policy growing dissension within labor movements and related developments the impact of corporatism across 16 affluent oecd countries in the 1980s and 1990s is assessed using pooled time series cross section analysis the results suggest that wage coordination was conducive to low unemployment in the 1980s because it fostered moderation in labor costs spurred faster economic growth and encouraged governments to more aggressively pursue policies to reduce unemployment in the 1990s this effect disappeared largely because unemployment outcomes in low wage coordination countries improved rather than because unemployment outcomes in high wage coordination countries deteriorated union participation in economic policymaking was associated with low unemployment throughout the two decades conditional on the presence of leftist government union participation appears to have had this effect mainly via government policy

what went wrong the erosion of relative earnings and employment among young black men in the 1980s this paper shows a widening in black white earnings and employment gaps among young men from the mid 1970s through the 1980s earnings gaps increased most among college graduates and in the midwest while gaps in employment population rates grew most among dropouts we attribute the differential widening to shifts in demand for subgroups due to shifting industry and regional employment the falling real minimum wage and deunionization the growing supply of black to white workers that was marked among college graduates and to increased crime among dropouts the different factors affecting subgroups highlight the economic diversity of black americans

the composite cost function and efficiency in giant japanese banks abstract this study provides further empirical investigation in the context of giant japanese banks of the recent claim by pulley and braunstein 1992 a composite cost function for multiproduct firms with an application to economies of scope in banking review of economics and statistics 74 221 230 that their new composite model for the multiproduct cost function has important advantages over the separable quadratic generalized translog and standard translog models in addition to assessing the composite model s relative ability in measuring global scope and scale economies the study also extends the p b analysis to assess measurement of product specific scope and scale economies pairwise cost complementarities between outputs changes in the marginal costs of outputs and technological change the results appear to confirm p b s chain the persistent finding of scale economies for large japanese banks is also investigated and confirmed

the impact of incarceration on wage mobility and inequality a life course perspective on crime indicates that incarceration can disrupt key life transitions life course analysis ofoccupations finds that earnings mobility depends on stable employment in career jobs these two lines of research thus suggest that incarceration reduces ex inmates access to the steady jobs that usually produce earnings growth among young men consistent with this argument evidence for slow wage growth among ex inmates is provided by analysis of the national longitudinal survey of youth because incarceration is so prevalent one quarter of black non college males in the survey were interviewed between 1979 and 1998 while in prison or jail the effect of imprisonment on individual wages also increases aggregate race and ethnic wage inequality

the competitive dynamics of geographic deregulation in banking implications for productive efficiency deregulation of geographic restrictions in banking over the past 20 years has intensified both potential and actual competition in the industry the accumulating empirical evidence suggests that potential efficiency gains associated with consolidating banks are often not realized we evaluate the impact of this increased competition on the productive efficiency of nonmerging banks confronted with new entry in their local markets and find that the incumbent banks respond by improving cost efficiency thus studies evaluating the impact of bank mergers on the efficiency of the combining parties alone may be overlooking the most significant welfare enhancing aspect of merger activity

the limits of wage flexibility to curing unemployment this article takes a critical look at the view that wage flexibility us style is the panacea to european unemployment problems it shows that the wage flexibility in the us in the 1980s 1990s was associated with rising inequality and falling real wages for many workers reduced rather than increased employment for the low paid and less skilled whose wages fell and arguably contributed to the growth of a significant criminal population the proportion of american men incarcerated comes close to the proportion of european men long term unemployed the limits to wage flexibility in curing unemployment noted in the paper does not mean the reductions in pay may not under some circumstances raise employment but rather that by themselves massive pay cuts for the low paid are no cure to economic problems copyright 1995 by oxford university press

labour use efficiency in swedish social insurance offices this paper considers the estimation of frontier production functions in panel data models it proposes a multi stage method to obtain estimates of 1 the parameters of a flexible input requirement function and 2 technical inefficiency decomposed into time invariant firm specific time varying and the residual components the proposed method is used to analyse labour use efficiency of swedish local social insurance offices on the basis of a large panel of observations during the time period 1974 84 empirical results show 1 substantial variations in labour use efficiency among these offices with the mean efficiencies declining over time 2 presence of economies of scale thereby meaning that most of the offices were of suboptimal size

juvenile incarceration human capital and future crime evidence from randomly assigned judges over 130 000 juveniles are detained in the united states each year with 70 000 in detention on any given day yet little is known about whether such a penalty deters future crime or interrupts social and human capital formation in a way that increases the likelihood of later criminal behavior this article uses the incarceration tendency of randomly assigned judges as an instrumental variable to estimate causal effects of juvenile incarceration on high school completion and adult recidivism estimates based on over 35 000 juvenile offenders over a 10 year period from a large urban county in the united states suggest that juvenile incarceration results in substantially lower high school completion rates and higher adult incarceration rates including for violent crimes in an attempt to understand the large effects we found that incarceration for this population could be very disruptive greatly reducing the likelihood of ever returning to school and for those who do return significantly increasing the likelihood of being classified as having an emotional or behavioral disorder jel codes k140 i210

how much of the diversification discount can be explained by poor corporate governance we investigate whether the diversification discount occurs partly as an artifact of poor corporate governance in panel data models we find that the discount narrows by 16 to 21 when we add governance variables as regression controls we also estimate heckman selection models that account for the endogeneity of diversification and dynamic panel generalized method of moments models that account for the endogeneity of both diversification and governance we find that the diversification discount persists even with these controls for endogeneity however in selection models the discount disappears entirely when we introduce governance variables in the second stage and in dynamic panel gmm models the discount narrows by 37 when we include governance variables

black white wage inequality employment rates and incarceration the observed gap in average wages between black men and white men inadequately reflects the relative economic standing of blacks who suffer from a high rate of joblessness the authors estimate the black white gap in hourly wages from 1980 to 1999 adjusting for the sample selection effect of labor inactivity among working age men in 1999 accounting for labor inactivity including prison and jail incarceration leads to an increase of 7 20 in the black white wage gap adjusting for sample selectivity among men ages 22 30 in 1999 increases the wage gap by as much as 58 increasing selection bias which can be attributed to incarceration and conventional joblessness explains about two thirds of the rise in black relative wages among young men between 1985 and 1998 apparent improvement in the economic position of young black men is thus largely an artifact of rising joblessness fueled by the growth in incarceration during the 1990s

do affluent countries face an incomes jobs tradeoff according to an influential view in the united states pay for less skilledworkers is lowand government benefits are stingy but this facilitates the creation of newjobs and encourages such individuals to take those jobs inmuch of westerneurope relative pay levels are higher for those at the bottom and benefits are more generous but this is said to discourage job creation and job seeking this article offers a comparative assessment of this trade off viewbased on pooled timeseries cross section analyses of 14 countries in the 1980s and 1990s the findings suggest that greater pay equality and a higher replacement rate do reduce employment growth in lowproductivity private sector service industries and in the economy as a whole however these effects are relatively weak the results point to a variety of viable options for countries wishing to maintain or move toward a desirable combination of jobs and equality

the political economy of imprisonment in affluent western democracies 1960 1990 research showing an association between business cycles and imprisonment is suspect on both theoretical and empirical grounds most research on this topic uses an impoverished notion of business cycles and pays no attention to differences in the institutional contexts of economic policymaking this article reexamines this issue using data from 15 affluent capitalist democracies observed over 30 years from 1960 to 1990 pooled regression techniques are used to test hypotheses regarding the effects of business cycles political power and the structure of labor market institutions results from simple models show the expected associations between business cycles and imprisonment rates but these associations disappear in models that include measures of politics and institutional structure this suggests that the business cycle imprisonment relationship is not causal but is instead an artifact of antecedent differences between neoliberal and corporatist societies

distribution of cost and profit efficiency evidence from indian banking this paper uses the nonparametric dea methodology to estimate cost and profit efficiency of indian banks during the post reform period the results show considerable variation in average levels of profit efficiency across various ownership categories of banks in general state owned banks are found to be more efficient than their private counter parts further efficiency tends to be low among the small banks assets up to rs 50 billion indicating that at the existing scale of operations these banks are operating far below the efficient frontier we also examine the distribution of efficiency using nonparametric kernel density estimates the analysis reveals a rightward shift of the efficiency distribution over the years a major part of this shift comes from the state owned banks based on the conditional distribution the study finds strong evidence of ownership explaining the efficiency differential of banks additionally bank size and product mix are also found to be important although to a lesser extent

corporate capital expenditure decisions and the market value of the firm abstract this paper is an event time study of the common stock prices of a sample of 658 corporations around the dates on which they publicly announced their future capital expenditure plans for industrial firms announcements of increases decreases in planned capital expenditures are associated with significant positive negative excess stock returns for public utility firm neither increases nor decreases in planned capital expenditures are associated with significant excess stock returns we interpret the evidence as being consistent with the hypothesis that managers seek to maximize the market value of the firm in making their corporate capital expenditure decisions

productivity and efficiency dynamics in indian banking an input distance function approach incorporating quality of inputs and outputs summary banking technology is typically characterized by multiple inputs and multiple outputs that are associated with various attributes such as different types of deposits loans number of accounts classes of employees and location of branches these quality differentials in inputs and outputs are mostly ignored in empirical studies these omissions make the practical value of productivity studies in organizations like banks questionable because quality is a key component of performance this paper proposes using hedonic aggregator functions as a tool of aggregating inputs and outputs with quality attributes within an input distance function framework and analyzes the impact of banking deregulation on efficiency and total factor productivity tfp change in the indian banking industry using panel data for the period 1996 2005 empirical results indicate that banks have improved their efficiency from 61 in 1996 to 72 in 2005 during the post deregulation period and the gain in efficiency of state owned banks has surpassed that of private banks improvement in capital base as indicated by increased capital adequacy ratio played an important role in ushering efficiency gain the return to scale estimate suggests that state owned banks are operating far above their efficient scale and cost savings can be obtained by reducing their size of operations overall tfp growth was above 3 5 annually both technical progress and technical efficiency change consistently played an important role in shaping tfp growth copyright 2010 john wiley sons ltd

information asymmetry valuation and the corporate spin off decision we empirically analyze the information hypothesis that the separation of a rm s divisions into independently traded units through a spin o enhances value because it mitigates information asymmetry about the rm consistent with this hypothesis we nd that rms that engage in spin o s have higher levels of information asymmetry compared to their industry and size matched counterparts and the information problems decrease signi cantly after the spin o the gains around spin o s are positively related to the degree of information asymmetry and this relation is more pronounced for rms with fewer negative synergies between divisions finally rms with higher growth opportunities and rms in need of external capital show a higher propensity to engage in spin o s they also raise more capital following a spin o which is consistent with the view that

firm heterogeneity persistent and transient technical inefficiency a generalized true random effects model this paper considers a panel data stochastic frontier model that disentangles unobserved firm effects firm heterogeneity from persistent time invariant long term and transient time varying short term technical inefficiency the model gives us a four way error component model viz persistent and time varying inefficiency random firm effects and noise we use bayesian methods of inference to provide robust and efficient methods of estimating inefficiency components in this four way error component model monte carlo results are provided to validate its performance we also present results from an empirical application that uses a large panel of us commercial banks

testing the relationship between competition and efficiency in banking a panel data analysis the relationship between competition and efficiency in the banking sectors of five eu countries is investigated using granger type causality test estimations we find positive causation between market power and efficiency whereas the causality running from efficiency to competition is weak

the effects of reform on china s bank structure and performance abstract this paper investigates the relationship between market structure and performance in china s banking system from 1985 to 2002 a period when this sector was subject to gradual but notable reform using panel data estimation techniques both the market power and efficient structure hypotheses are tested in addition the model is extended to consider issues such as the impact of bank size ownership and whether the big four banks enjoy a quiet life on average x efficiency declined significantly and most banks were operating below scale efficient levels estimation of the structure performance models lends some support to the relative market power hypothesis in the early period the reforms had little impact on the structure of china s banking sector though the joint stock banks became relatively more x efficient there was no evidence to support the quiet life hypothesis probably because strict interest rate controls prevented the state banks from earning monopoly profits thus the ongoing liberalisation of interest rates should be accompanied by reduced concentration overall to improve competitive structure new policies should be directed at encouraging market entry and increasing the market share of the most efficient banks

the positive announcement period returns of equity carveouts asymmetric information or divestiture gains using a sample of 336 carveouts that occurred in the period 1980 97 this article shows that the announcement period returns increase with the ratio of subsidiary to nonsubsidiary assets this finding contradicts the asymmetric information model proposed by nanda additional tests relate the returns to the following divestiture based explanations proposed by schipper and smith and others refocusing of the parent and subsidiary operations financing of new and existing projects reducing the complexity of stock valuation and enabling an eventual spinoff or third party acquisition the combined evidence rejects the asymmetric information hypothesis and supports the divestiture gains hypothesis of carveouts

the socioeconomic determinants of ill gotten gains within person changes in drug use and illegal earnings generalizing from the sociology of earnings attainment we develop a conceptual model of social embeddedness in conventional and criminal activities to explain illegal earnings among criminal offenders to isolate the effects of time varying factors such as legal earnings drug use and criminal opportunities we use data from the national supported work demonstration project to estimate fixed effects models predicting month to month changes in illegal earnings we find that criminal earnings are sensitive to embeddedness in conforming work and family relationships criminal experience and the perceived risks and rewards of crime moreover heroin and cocaine use creates a strong earnings imperative that is difficult to satisfy in the low wage labor market and offenders earn far more money illegally when they are using these drugs than during periods of abstinence

efficiency measurement in swedish dairy farms an application of rotating panel data 1976 88 this paper introduces a new specification of technical inefficiency in panel data models first the overall technical inefficiency is decomposed into a persistent component and a residual component second a multistep procedure is used to estimate the parameters of the production function as well as persistent and residual technical inefficiency the advantage of this multistep procedure is that the parameter estimates are robust to distributional assumptions on the error components distributional assumptions are required in the final stage to estimate the residual component of technical inefficiency the model is used to examine technical efficiency in swedish dairy farms during the period 1976 to 1988

how unregulated is the u s labor market the penal system as a labor market institution1 comparative research contrasts the corporatist welfare states of europe with the unregulated u s labor market to explain low rates of u s unemployment in the 1980s and 1990s in contrast this article argues that the u s state made a large and coercive intervention into the labor market through the expansion of the penal system the impact of incarceration on unemployment has two conflicting dynamics in the short run u s incarceration lowers conventional unemployment measures by removing able bodied working age men from labor force counts in the long run social survey data show that incarceration raises unemployment by reducing the job prospects of ex convicts strong u s employment performance in the 1980s and 1990s has thus depended in part on a high and increasing incarceration rate

what is wrong with the west european economies tol and yohe point out that in their reply vol 8 no 1 to tol and yohe s review vol 7 no 4 the stern team demonstrates the fragility of the numerical findings of the cost benefit analysis in the stern review at the same time the stern team puts less weight on cost benefit analysis as a guide to policy making on climate change tol and yohe show that the stern review allows several mutually contradictory interpretations of the model that underlies the cost estimates and argue that each interpretation implies that stern s cost estimates have a severe downward bias

the effect of arrests on the employment and earnings of young men many young men commit crime and many are arrested i estimate the effect of arrests on the employment and earnings of arrestees using a large longitudinal data set constructed by merging police records with ui earnings data i find that the effects of arrests are moderate in magnitude and rather short lived

the impact of liberalization on the productive efficiency of indian commercial banks abstract we examine the productive efficiency of 70 indian commercial banks during the early stages 1986 1991 of the ongoing period of liberalization we use data envelopment analysis to calculate radial technical efficiency scores we then use stochastic frontier analysis to attribute variation in the calculated efficiency scores to three sources a temporal component an ownership component and a random noise component we find publicly owned indian banks to have been the most efficient followed by foreign owned banks and privately owned indian banks we also find a temporal improvement in the performance of foreign owned banks virtually no trend in the performance of privately owned indian banks and a temporal decline in the performance of publicly owned indian banks we attempt to explain these patterns in terms of the government s evolving regulatory policies

impact of financial reforms on efficiency of state owned private and foreign banks in pakistan this article uses a unique bank level data from 1991 to 2000 and evaluates how financial reforms affect banking efficiency of domestic and foreign banks in pakistan the results suggest that banking efficiency falls during initial reform period when banks adjust to enhanced competition but increases in more advanced stages of reform while in general foreign and private banks show superior efficiency and factor productivity than do state owned banks the relative performance of foreign banks worsens after the consolidation stage of the financial reforms is over we show the importance of link between bank size asset quality and bank branches with efficiency indexes and also note that every 10 increase in share of nonperforming to total loans decreases banking efficiency by 6 to 10

economies of scale technical change and persistent and time varying cost efficiency in indian banking do ownership regulation and heterogeneity matter abstract banks with different ownership types adjust differently to changes in regulatory environments although this topic has been widely studied all the previous studies fail to control for bank heterogeneity bank specific effects in estimating cost structure and efficiency we propose a model where we control for bank heterogeneity and introduce persistent and time varying inefficiency additionally we incorporate determinants of both persistent and time varying inefficiency as well as production risks furthermore our model allows estimation of different technologies for different ownership types jointly we use this model to analyze the effect of regulation in indian banking we find that private banks have not exhausted their economies of scale foreign banks are operating under diseconomies of scale especially after the reforms and scale economies of state owned banks are unaffected by regulation banks of all ownership types have enjoyed technical progress however foreign banks have benefited the most followed by state owned banks only state banks were able to improve their cost efficiency while private banks and especially foreign banks were lagging behind their cost frontiers

using the capital market as a monitor corporate spinoffs in an agency framework a model is developed in which corporate spinoffs are a feature of incentive contracts for product managers in diversified firms i argue that the possibility of a future spinoff can improve current incentives for divisional managers even if a spinoff rarely actually occurs spinoff incentive policies exploit the fact that after a spinoff the stock value of the product line is a much cleaner signal of managerial productivity than when the division belongs to the parent firm i show that providing current incentives through such a reorganization policy can dominate standard principal agent contracts in highly diversified firms empirical implications of the model are developed regarding corporate spinoff behavior and the compensation of divisional managers

investment banker reputation and two stage combination carve outs and spin offs abstract this study examines whether investment banker reputation impacts the initial period returns of two stage combinations carve outs followed by spin offs all prior literature regarding investment banker reputation is based on single stage events ipos an analysis is conducted of all completed two stage carve outs spin offs from 1981 to 2002 findings indicate that underwriters for two stage combinations retain their reputation in contrast with the single stage findings of carter et al carter r b dark f h piwowar m s 2002 ipos and underwriter reputation redeeming the value of reputation working paper iowa state university that investment bankers redeemed cashed in their reputation also this study finds that the carter et al reputation factors dominate the loughran and ritter loughran t ritter j r 2002 why don t issuers get upset about leaving money on the table in ipos the review of financial studies 15 2 413 443 reputation factors

incarceration and racial inequality in men s employment to estimate employment population ratios for black and white men with an adjustment for incarceration a factor overlooked by most research on employment inequality the authors combine data from sur

the white black educational gap stalled progress and the long term consequences of the emergence of crack cocaine markets abstract we propose the rise of crack cocaine markets as a key explanation for the end to the convergence in black white educational outcomes in the united states that began in the mid 1980s after constructing a measure to date the arrival of crack markets in cities and states we show that the decline in educational outcomes for black males begins with the start of the crack epidemic we also show that there are higher murder and incarceration rates after the arrival of crack cocaine and that these are predictive of lower black high school completion rates a result consistent with human capital theory we estimate that effects related to crack markets can account for approximately 40 to 70 of the fall in black male high school completion rates

does a parent subsidiary structure enhance financing flexibility i examine whether firms exploit a publicly traded parent subsidiary structure to issue equity of the overvalued firm regardless of which firm needs funds and whether this conveys opposite information about firm values using 90 subsidiary and 37 parent seasoned equity offering seo announcements during 1981 2002 i document negative returns to issuers but insignificant returns to nonissuers in both samples and insignificant changes in combined firm value and parent s nonsubsidiary equity value in subsidiary seos firms issue equity to meet their own financing needs my evidence contrasts with previous studies and suggests that parent subsidiary structures

financial sector liberalization bank privatization and efficiency evidence from pakistan abstract the pakistani banking system has been transformed over the past 15 years through liberalization the entry of private banks the privatization of public sector banks and the tightening of prudential regulations the effects of these changes on bank productivity and relative efficiency are investigated using various techniques bank productivity in terms of profits has increased and new entrants have been efficient but the dispersion of efficiency remains wide the privatized banks improved their profit efficiency in the period immediately following their privatization but in the subsequent years only one significantly improved its efficiency whereas the other did not differentiate itself in terms of efficiency from the remaining state owned banks the new private domestic banks generally proved to be among the most efficient and sometimes out performed the foreign banks

deregulation ownership and productivity growth in the banking industry evidence from india this paper analyzes the relationship between deregulation and total factor productivity tfp growth in the indian banking industry using a generalized shadow cost function approach tfp growth is decomposed into a technological change a scale and a miscellaneous component a disaggregated panel data analysis using the population of public and private banks over 1985 96 that covers both pre and post deregulation periods indicates that a significant decline in regulatory distortions and the anticipated increase in tfp growth have not yet materialized following deregulation while private sector banks have improved their performance mainly due to the freedom to expand output public sector banks have not responded well to the deregulation measures

security price reactions around corporate spin off announcements abstract we examine security price reactions around the announcements of 123 voluntary spin offs by 116 firms between 1963 and 1981 involving a pro rata distribution of the common stock of a subsidiary to the stockholders of the parent firm the median spin off in the sample is 6 6 of the original equity value and is associated with an abnormal return of 7 0 from 50 days prior to the announcement through completion of the spin off no evidence is found to indicate the gains to stockholders represent wealth transfers from senior securityholders over the entire event period we find positive gains for firms engaging in spin offs to facilitate mergers or to separate diverse operating units but negative returns to firms responding to legal and or regulatory difficulties in the two day interval surrounding the first press announcement we find positive average excess returns for all groups

life course risks mobility regimes and mobility consequences a comparison of sweden germany and the united states1 the analysis of intergenerational mobility has primarily used measures of social position that are functions of an individual s occupation occupation based models of social mobility however have limitations that arguably have grown in recent decades meta analysis of available evidence for sweden western germany and the united states concerning occupational mobility household income mobility job displacement union dissolution and poverty dynamics shows the limitations of the individual level occupation based career trajectory approach to life course mobility this article develops an alternative formulation at the household level which focuses on cross national variation in the extent to which societal institutions influence the rate of events with the potential to change a household s life conditions via the manipulation of incentives for mobility generating events and the extent to which they mitigate the consequences of these events through social insurance the combination of these institut

technical scale and allocative efficiencies of turkish banking industry this paper investigates input and output efficiency in the turkish banking industry to understand the impact of size international variables ownership control and governance on profit cost allocative technical pure technical and scale efficiency measures employing a non parametric approach along with a parametric approach we estimate the efficiency of turkish banks over the 1988 1996 period this period allows us to account for the changes in the macro economy and regulatory treatment of the turkish banking industry over time our results suggest that the heterogeneous characteristics of banks have significant impact on their efficiency moreover cost and profit efficiencies of the turkish banks have exacerbated over time results also indicate that the dominant source of inefficiency in turkish banking is due to technical inefficiency rather than allocative inefficiency which is mainly attributed to diseconomies in scale to the extent that they chose an inefficient level of production bank management is responsible for scale inefficient operations however increasing demand for banking services in the nineties fueled by the state s increasing demand for funds to finance chronic budget deficits and high growth policies and the oligopolistic nature of the turkish banking market do not justify scale adjustments our policy suggestions are that the government implement financial reform packages that foster competition in the banking market and that the industry devise incentive schemes to improve managerial efficiency

equity carve outs and managerial discretion this study proposes a managerial discretion hypothesis of equity carve outs in which managers value control over assets and are reluctant to carve out subsidiaries thus managers undertake carve outs only when the firm is capital constrained consistent with this hypothesis firms that carve out subsidiaries exhibit poor operating performance and high leverage prior to carve outs also consistent with this hypothesis in carve outs wherein funds raised are used to pay down debt the average excess stock return of 6 63 percent is significantly greater than the average excess stock return of 0 01 percent for carve outs wherein funds are retained for investment purposes in this study we investigate the financial and operating performance of firms that undertake equity carve outs and analyze the cross section of excess stock returns around the announcement of these transactions in an equity carve out a firm offers to sell shares in a wholly owned subsidiary to the public as such a carve out can be viewed as the sale of an asset or as an equity offering schipper and smith 1986 focus on carve outs as equity offerings and compare the announcement period stock returns of carve outs with those of seasoned equity offerings in this study we view the carve out as the sale of an asset which is intended to raise funds to finance other activities of the parent or the subsidiary in viewing equity carve outs as asset sales we borrow from the work of lang poulsen and stulz 1995 who propose and test a financing hypothesis to explain the cross section of excess stock returns around announcements of asset sales the characterization of an equity carve out as a sale of assets must be tempered by the fact that certain features distinguish carveouts from outright asset sales equity carve outs are asset sales to public shareholders as opposed to a single buyer carve outs are undertaken explicitly for the purpose of raising funds in the capital market and the parent firm typically continues to hold a substantial fraction of the equity of the carved out subsidiary following the offering equity carve outs are similar to asset sales in that funds raised in the offering can be either retained within