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Appears in Collections:Accounting and Finance Journal Articles
Peer Review Status: Refereed
Title: Value creation through spin-offs: A review of the empirical evidence
Author(s): Veld, Chris
Veld-Merkoulova, Yulia V
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Keywords: spin-offs
value creation
event study
long-run excess returns
industrial focus
Corporations Finance
Issue Date: Dec-2009
Date Deposited: 20-Nov-2009
Citation: Veld C & Veld-Merkoulova YV (2009) Value creation through spin-offs: A review of the empirical evidence. International Journal of Management Reviews, 11 (4), pp. 407-420.
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). We use meta-analysis to summarize the findings of 26 event studies on spin-off announcements. We find a significantly positive average abnormal return of 3.02% 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. We also find that spin-offs that are later completed are associated with lower abnormal returns than non-completed spin-offs. In the second part of the paper we overview 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.
DOI Link: 10.1111/j.1468-2370.2008.00243.x
Rights: Published in the International Journal of Management Reviews. Copyright: Wiley-Blackwell / British Academy of Management.; The definitive version is available at; Rights as indicated by the Exclusive Licence Form:

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