earticle

영어

This paper examines how investor inertia and limited arbitrage might interact to benefit the controlling families of business groups in a way that is distinct from tunneling or expropriation. Using spin-offs followed by stock-for-stock tender offers by Korean publicly traded firms, we find that outside investors remain passive while family insiders actively tender their shares of the operating subsidiary in exchange for newly issued shares in the holding company. We also find that mispricing relative to those implied in the tender offer exchange ratio is not arbitraged away in 2/3 of our sample transactions, implying a clear violation of law of one price. Such mispricing provides controlling families with a wealth gain of 4 to 5% on average. Our results suggest that insiders may actively exploit behavioral aspects of the stock market to maximize their personal benefits.