This paper examines a sample of 129 equity carve-outs in Taiwan between 1994 and 2007. The study first finds evidence that there are significantly positive stock price reactions during initial announcements of equity carve-outs, which is consistent with the evidence discovered in Europe, U.S., and Singapore. The sources of wealth effect due to equity carve-outs are also identified using univariate and multivariate regressions. The combined evidence indicates that the market in Taiwan reacts positively to the announcement of equity carve-outs because the perceived wealth gains could be attributable to higher parent ownership that signals a better quality firm, divesting unrelated businesses, and using the proceeds to undertake new investments.