Deutscher Universitätsverlag Equity Carveouts, Agency Costs, and Firm Value (Entrepreneurship)

Product Description Lukas Junker shows that in contrast to the dominantly positive assessment, on the German capital market and on a long-term basis ECOs are associated with a deterioration of firm value. This can be mainly explained by a lack of independence of the subsidiary in the typical transaction. From the Back Cover Equity Carveouts (ECOs), the initial public offering of shares in a subsidiary of a group of companies, are a relatively frequent phenomenon on the German capital market. The success of such prominent transactions as the carveout of Infineon or T-Online has been controversially discussed in both practice and academia. Lukas Junker examines if ECOs lead to a sustainable, long-term increase in firm value. His analysis is based on an agency perspective and ECOs are understood as an instrument of financing and reorganization that leads to a reconfiguration of the incentive structure in the groups of companies. In contrast to the dominantly positive assessment, results show that on the German capital market and on a long-term basis ECOs are associated with a deterioration of firm value. This can be mainly explained by a lack of independence of the subsidiary in the typical transaction: The reorganization is not beneficial, since most subsidiaries effectively remain part of the groups of companies with the holding company retaining a majority interest. About the Author Dr. Lukas Junker promovierte bei Prof. Dr. Malte Brettel am Lehrstuhl für Wirtschaftswissenschaften für Ingenieure und Naturwissenschaftler der Rheinisch-Westfälischen Technischen Hochschule Aachen. Er ist als Unternehmensberater im Sektor Financial Institutions bei McKinsey & Company in Frankfurt am Main tätig.