Prof. Yakov Amihud is Ira Rennert Professor of Entrepreneurial Finance at the Stern School of Business, New York University. Detailed profile can be found HERE.
December 23, 2024
Liquidity Spillovers: Evidence from Two-Step Spinoffs
How does an idiosyncratic shock to the liquidity of a stock affect the liquidity and prices of related stocks? Utilizing the feature that the second stage of a two-step spinoff increases the float of an already-public firm, we document strong evidence that the enhanced liquidity of spun-off firms spills over to their industry peers after the spinoffs. These liquidity spillovers lead to value spillovers as well. The improved liquidity also induces greater pricing efficiency and larger institutional holdings in those stocks. The results provide support for the notion that the prices of spun-off firms provide additional public information about the related firms, thereby ameliorating information asymmetry in those firms.
liquidity, asset pricing, spinoffs
