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Changes in Organizational Structure and Shareholder Wealth: The Case of Limited Partnerships

Published online by Cambridge University Press:  06 April 2009

Karen C. Denning  and
Kuldeep Shastri
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Abstract

This paper analyzes the consequence for shareholders of a change in organizational form, the conversion of a corporation, or the spin-off of a unit into a limited partnership. Theory suggests that, prior to the Tax Reform Act of 1986, the tax benefits of conversion to a limited partnership and the creation of a new entity separate from the parent corporation should have a positive effect on shareholder wealth. On the other hand, the increase in agency costs of such an organizational change should decrease the wealth of shareholders. Empirical results lend support to hypotheses that predict an increase in stock price at the announcement of the conversion, but cannot identify the source of the gain.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 28 , Issue 4 , December 1993 , pp. 553 - 564
Copyright
Copyright © School of Business Administration, University of Washington 1993

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