Institutional Demand and Security Price Pressure: The Case of Corporate Spinoffs
   The significant presenceo f institutionailn vestorsin today'sc apitalm arketsu ggestst hatt he objectiveas nd constraintso f thesep articipantcsa n dramaticallayf fectt he behavioor f security prices.T hisp aper,a s an examplet, estst heh ypothesitsh att hen eedf or institutionailn vestors to rebalancteh eirp ortfoliosb y liquidatingn ewlyc reatedc orporatsep inoffs haresg eneratesa substantiala, lthought emporarys,e llingp ressurei n theses ecurities.
    A sample of 74 publiclyt radeds pinoffso vert hep eriodfr omJ anuary1 980 to April1 990 demonstratest hat, on average, the initial decline in the spinofff irm's stock price is significantlyr elatedt o the degreet o whichi nstitutionsd ivestt heirs haresi n thef irm. Block tradesb y institutionali nvestorsc reatet he largestm ovementsin value. The pricep ressure fromi nstitutionasl alesa ppearst o bea functiono f parenta nds pinoff-firmch aracteristicths at proxyf or the investmentr estrictionfsa cedb y institutions.