Value creation through spin-offs: a review of the empirical evidence

Veld, C. and Veld-Merkoulova, Y. (2009) Value creation through spin-offs: a review of the empirical evidence. International Journal of Management Reviews, 11(4), pp. 407-420. (doi: 10.1111/j.1468-2370.2008.00243.x)

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Abstract

This paper reviews the literature on the factors that influence the wealth effects associated with the announcements of corporate spin-offs (also known as demergers). Meta-analysis is used to summarize the findings of 26 event studies on spin-off announcements. A significantly positive average abnormal return of 3.02% is found during the event window. Returns are higher for larger spin-offs, for divestments that are tax or regulatory friendly and for spin-offs that lead to an improvement of industrial focus. It is also found that spin-offs that are later completed are associated with lower abnormal returns than non-completed spin-offs. The second part of the paper overviews studies on the long-run stock price performance of spin-offs. Even though early studies find a long-run superior performance, this effect is no longer found in later studies that use more refined statistical tests.

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.
Subjects:H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:International Journal of Management Reviews
ISSN:1460-8545
ISSN (Online):1468-2370
Published Online:28 August 2008

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