Do spin-offs really create value? The European case [An article from: Journal of Banking and Finance]

This digital document is a journal article from Journal of Banking and Finance, published by Elsevier in 2004. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
We study wealth effects for a sample of 156 spin-offs from 15 different European countries that were announced between January 1987 and September 2000. The cumulative average abnormal return over the 3-day event window is 2.62%. This number increases to 2.66% for the subsequently completed spin-offs. The cumulative average abnormal return is 3.57% for completed spin-offs by companies that increase their industrial focus and only 0.76% for non-focus increasing companies. The difference between these two sub-samples is significantly different from zero. These results are in line with previous studies for the US. The long-run returns in excess of matching firms are mostly insignificant for parents, subsidiaries and pro-forma combined firms. This result suggests that, unlike US spin-offs, European spin-offs are not associated with long-run superior performance.