An Examination of Corporate Spin-Offs on Company Performance and Shareholder Value

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Scicluna, Karl (2015) An Examination of Corporate Spin-Offs on Company Performance and Shareholder Value. [Dissertation (University of Nottingham only)]

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Abstract

The aim of this study is to examine the implications of corporate spin-offs on

company performance and shareholder value. The study uses both event study

and accounting-based study methodologies to assess the stock price response of

parent companies to the announcement of spin-offs, and to analyse the long-run

operating performance of spin-offs for both parent and subsidiary companies.

The study focuses on UK and US firms between 2001 and 2011.

Evidence collected from the event study and accounting-based study

methodologies enable the study to differentiate between the short-term and

long-term wealth effects of corporate spin-offs. Findings from the event study

reveal and confirm that corporate spin-off announcements result in abnormal

stock market returns. A mean cumulative abnormal return of 2.71% was

reported during the estimation window. Furthermore, the findings of this study

endorses the theory that cross-industry spin-off announcements result in higher

abnormal stock market returns than own-industry spin-off announcements.

Findings from the accounting-based study reveal that the wealth effects

associated with corporate spin-offs do not persist in the long-run to the same

degree as revealed during the spin-off announcements. There is also evidence to

suggest that the relative size of the divestiture, the leverage situation of the

parent company and the capital expenditure of the parent company, may have a

significant influence on the performance of spin-offs.

Item Type: Dissertation (University of Nottingham only)
Depositing User: Scicluna, Karl
Date Deposited: 23 Mar 2016 15:54
Last Modified: 19 Oct 2017 14:52
URI: https://eprints.nottingham.ac.uk/id/eprint/30160

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