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Appears in Collections:Accounting and Finance Journal Articles
Peer Review Status: Refereed
Title: Do spin-offs really create value? The European case
Author(s): Veld, Chris
Veld-Merkoulova, Yulia V
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Keywords: divestitures
event study
long-run excess returns
industrial focus
Issue Date: 2004
Date Deposited: 16-Sep-2008
Citation: Veld C & Veld-Merkoulova YV (2004) Do spin-offs really create value? The European case. Journal of Banking and Finance, 28 (5), pp. 1111-1135.
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 three-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 United States. 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 U.S. spin-offs, European spin-offs are not associated with long-run superior performance.
DOI Link: 10.1016/S0378-4266(03)00045-1
Rights: Published in Journal of Banking and Finance by Elsevier

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