An analysis of divestiture effects resulting from deregulation

Article Abstract:

The breakup of AT & T is studied to analyze the effects of divestiture and deregulation on corporate economic performance. Divestiture theory suggests that breakups can result in transfers of wealth between bondholders, stockholders and third parties (in this case, the government and consumers) and that the deregulation process reduces the 'buffering effect' of government regulation, which in turn increases the riskiness of share holding. Capital market data taken from the deregulation period (1-1-81 to 8-1-84) supports both the transfer of wealth theory and the buffering effect theory.

Case studies, Economic aspects, Finance, Deregulation, Industry regulations, Government regulation of business, Trade regulation, Corporate divestiture, Divestiture, American Telephone and Telegraph Co.

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The price effect of option introduction

Article Abstract:

This paper examines the price effect of option introduction from 1974 to 1980. The introduction of individual options causes a permanent price increase in the underlying security, beginning approximately three days before introduction. The price effect appears to be associated with introduction, and not announcement, throughout the sample period. Excess returns volatility declines with option introduction. Systematic risk is unchanged. There is a positive relation between the price increase and a measure of activity in the options market. (Reprinted by permission of the publisher.)

Research, Risk (Economics), Options (Finance), Securities, Pricing

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