We investigate the determinants of the choice between two forms of corporate divestitures—spin-offs versus sell-offs. We hypothesize that the choice is driven by the pre-divestiture market valuation of divesting firms relative to their intrinsic value, the pre-divestiture performance of the assets being divested relative to their full potential, and the prevailing degree of investor optimism or pessimism about the market at the time of divestiture. Our hypotheses generate testable predictions regarding the announcement effects of divestitures and the post-divestiture operating performance of divesting firms. Our empirical findings using a sample of 378 spin-offs and 4192 sell-offs from 1980 to 2011 are as follows. First, firms with lower market valuations relative to their intrinsic value are more likely to spin off their assets. Second, assets which underperform relative to their full potential are more likely to be sold off. Third, spin-offs are more likely during periods of investor optimism. Fourth, spin-offs are associated with more positive announcement effects than sell-offs. Finally, firms which sell off their assets exhibit better post-divesture long-term operating and stock return performance compared to those which spin off their assets.

Using various centrality measures from social network analysis, we analyze how the location of a lead initial public offering (IPO) underwriter in its network of investment banks affects various IPO characteristics. We hypothesize that investment banking networks allow lead IPO underwriters to induce institutions to pay attention to the firms they take public and to perform two information-related roles during the IPO process: an information dissemination role, in which the lead underwriter uses its investment banking network to disseminate noisy information about various aspects of the IPO firm to institutional investors; and an information extraction role, in which the lead underwriter uses its investment banking network to extract information useful in pricing the IPO firm equity from institutional investors. Based on these two roles, we develop testable hypotheses relating lead IPO underwriter centrality to the IPO characteristics of firms they take public. We find that more central lead IPO underwriters are associated with larger absolute values of offer price revisions, greater IPO and after-market valuations, larger IPO initial returns, greater institutional investor equity holdings and analyst coverage immediately post-IPO, greater stock liquidity post-IPO, and better long-run stock returns. Using a hand-collected data set of pre-IPO media coverage as a proxy for investor attention, we show that an important channel through which more central lead IPO underwriters achieve favorable IPO characteristics is by attracting greater investor attention to the IPOs underwritten by them.