 Divestitures come in many forms, let's see few of them. Sales It is the most basic type of divestiture. It includes sale of a devion, a business unit, a segment or a set of assets to another firm. The buyer generally pays in cash. There are few reasons behind the sales of assets. It works as a defense against the hostile takeovers because the sale of assets improves target firm's value and the firm becomes expensive for the acquirer. Also, the sale of assets corrects poor liquidity of the firm. Third, lack of data about individual units put large diversified firms harder to value. Selling unprofitable devions are likely to have low value and similarly low traction for the acquirer. Academic research concludes on sale of assets in the way that sell-offs create value to the sellers and acquisitions are often sold off in the future. Spin-off Another way of divestiture. In this case, the parent company turns a unit into a separate entity and gives its shares among its on-stock holders. Spin-offs differ from sales in two aspects. The first is that the parent's shareholders get shares only. Second difference is that initially the initial owners in spun-off are same as the parent's owners but this ownership may differ or it may change in the days to come. If we see the reasons behind spin-off, we can see it increases the corporate focuses. It enables a firm for disclosure of additional information to public to value parent and subsidiary after the spin-off transaction. There is a positive relationship between manager leferts and the subsidiary's stock prices. Better tax consequences from spin-off are there as parent receives no cash. Similarly, there is no tax implication. Another form of divestiture is the car vote plans, where the parent company turns a unit into a separate entity and often offers its lesser amount of shares to the general public and the parent company retains larger amount of shareholding with herself. Car vote deal is similar to a spin-off with the difference that the parent receives cash in car vote plan but it is not the case in the form of a spin-off. Large profitable firms more likely to use car vote plans as it involves the cash whereas small unprofitable firms more likely to use spin-off due to the difficulty of issuing stock. But there is a dark side to cash under free cash flow hypothesis because the existence of extra cash in profitable capital budgeting projects may induce managers to go for unprofitable spendings. But stock market reacts positively to car vote announcements in the situation where the cash is used for debt reduction and new investment projects. Tracking stocks, another form of divestiture. In this case, parent's issue, a parent company issues tracking stock to track the performance of any of its specific division. For example, size of dividend on a tracking stock determines a division's performance. This means that if a division pays higher amount of dividend on its stock, this means that division has earned a good amount of profit which shows better operating efficiency done by that particular division. Tracks trade separately from the parent's stock but the division stays with the parent company whereas the spin-off separates subsidiary from the parent's company. There is a major problem with the tracker's stock and that problem is the lack of clearly defined property rights on the stocks issued as a tracking stock. If we observe some behavioral approaches of accountants in this case to see that the optimistic accountants can raise the earnings of a particular division thereby leading their division to a larger dividend and so far as the pessimistic accountant is concerned, such accountants will have the reverse effect. This means that accountants may affect the firm's earnings but there is no direct impact on the dividend.