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Dissertation JUL2014.pdf (1.51 MB)

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Disclosure Tone of the Spin-off Prospectus and Insider Trading

Choi, Wonik
http://rave.ohiolink.edu/etdc/view?acc_num=osu1406213292

Abstract Details

2014, Doctor of Philosophy, Ohio State University, Accounting and MIS.
This paper examines the relation between the tone of a spin-off’s prospectus and insider trading to determine whether managers manipulate the tone to enhance profits from their transactions in the spun-off subsidiary. I document that the tone of the Management’s Discussion and Analysis (MD&A) in a spin-off prospectus is more pessimistic when insiders buy more shares of the spun-off subsidiary within three months of the spin-off date, after controlling for other determinants of the tone of the MD&A. I also find that the negative relation between tone and insider trading exists only for the sub-sample of executives of the spun-off subsidiary who have also been executives in the parent company prior to the spin-off. Additional tests show that the link between tone and insider trading depends on cross-sectional variation associated with opportunities to manipulate the prospectus tone. Given that insiders are extensive net buyers of stock in the new public subsidiary, these findings suggest that managers could use more pessimistic tone in the prospectus to disguise upside potential of the spun-off subsidiary in order to seize the opportunity to purchase undervalued shares.
Darren Roulstone (Committee Chair)
Anil Arya (Committee Member)
Anne Beatty (Committee Member)
Tzachi Zach (Committee Member)
88 p.
Accounting

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Citations

  • Choi, W. (2014). Disclosure Tone of the Spin-off Prospectus and Insider Trading [Doctoral dissertation, Ohio State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=osu1406213292

    APA Style (7th edition)

  • Choi, Wonik. Disclosure Tone of the Spin-off Prospectus and Insider Trading. 2014. Ohio State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=osu1406213292.

    MLA Style (8th edition)

  • Choi, Wonik. "Disclosure Tone of the Spin-off Prospectus and Insider Trading." Doctoral dissertation, Ohio State University, 2014. http://rave.ohiolink.edu/etdc/view?acc_num=osu1406213292

    Chicago Manual of Style (17th edition)

osu1406213292
1,580
© 2014, all rights reserved.
This open access ETD is published by The Ohio State University and OhioLINK.