We provide evidence about the motivation for a parent–subsidiary governance structure by analyzing valuation effects of seasoned equity offerings by publicly traded affiliated units. Our results support Nanda's (1991) theoretical model which predicts equity offerings convey differential information about subsidiary and parent value. Subsidiary equity issuance has negative valuation effects on issuing subsidiaries and positive effects on parents, while parent equity issuance reduces issuing parent wealth and increases subsidiary wealth. Our evidence suggests that a parent–subsidiary organizational structure enhances corporate financing flexibility and mitigates underinvestment problems identified by Myers and Majluf (1984) . There is no evidence of subsidiary wealth expropriation.

We provide evidence about the motivation for a parent–subsidiary governance structure by analyzing valuation effects of seasoned equity offerings by publicly traded affiliated units. Our results support Nanda's (1991) theoretical model which predicts equity offerings convey differential information about subsidiary and parent value. Subsidiary equity issuance has negative valuation effects on issuing subsidiaries and positive effects on parents, while parent equity issuance reduces issuing parent wealth and increases subsidiary wealth. Our evidence suggests that a parent–subsidiary organizational structure enhances corporate financing flexibility and mitigates underinvestment problems identified by Myers and Majluf (1984). There is no evidence of subsidiary wealth expropriation.

The authors provide evidence about the motivation for a parent-subsidiary governance structure by analyzing valuation effects of seasoned equity offerings by publicly traded affiliated units. Their results support Vikram Nanda's (1991) theoretical model which predicts equity offerings convey differential information about subsidiary and parent value. Subsidiary equity issuance has negative valuation effects on issuing subsidiaries and positive effects on parents, while parent equity issuance reduces issuing parent wealth and increases subsidiary wealth. The authors' evidence suggests that a parent-subsidiary organizational structure enhances corporate financing flexibility and mitigates underinvestment problems identified by Stewart Myers and Nicholas Majluf (1984). There is no evidence of subsidiary wealth expropriation.

The authors analyze how ownership concentration affects firm value and control of public companies by examining effects of deaths of inside blockholders. They find shareholder wealth increases, ownership concentration falls, and extensive corporate control activity ensues. Share price responses are related to the deceased's equity stake. Control group holdings fall for two-thirds of the firms due to either the estate's dispersal or inheritors selling stock. A majority of firms become targets of control bids: three-quarters of bids are successful; one-third are hostile. The authors' evidence is broadly consistent with Stulz's (1988) model of the relationship between ownership concentration and firm value.