An empirical analysis of the stockholder-bondholder conflict in corporate spin-offs

Veld, C. and Veld-Merkoulova, Y. V. (2008) An empirical analysis of the stockholder-bondholder conflict in corporate spin-offs. Financial Management, 37(1), pp. 103-124. (doi: 10.1111/j.1755-053X.2008.00006.x)

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Abstract

We analyze the effect of daily stock and bond abnormal returns around spin-off announcements. Over a three-day event window, we find statistically significant abnormal returns of 3.07% for stocks and 0.11% for straight bonds. Both stock and bond abnormal returns are higher for firms with lower interest and dividend payouts. Stock abnormal returns are also higher for firms with higher pre-spin-off leverage. Overall, we find that the firm value increase compensates for the wealth transfer effect and that bondholders’ wealth is not reduced as a result of spin-off.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Veld, Professor Chris and Veld-Merkoulova, Professor Yulia
Authors: Veld, C., and Veld-Merkoulova, Y. V.
Subjects:H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:Financial Management
ISSN:1755-053X

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