Do spin-offs really create value? The European case

Veld, C. and Veld-Merkoulova, Y. (2004) Do spin-offs really create value? The European case. Journal of Banking and Finance, 28(5), pp. 1111-1135. (doi: 10.1016/S0378-4266(03)00045-1)

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Abstract

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.

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.
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:Journal of Banking and Finance
ISSN:0378-4266
Published Online:25 March 2003

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