Do Spin-Offs Really Create Value? The European Case

40 Pages Posted: 9 Jan 2002

See all articles by Chris Veld

Chris Veld

Monash University

Yulia V. Veld-Merkoulova

Monash University - Department of Finance; Financial Research Network (FIRN)

Date Written: May 22, 2002

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 both for focus-increasing and non-focus increasing 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 outperformance.

JEL Classification: G32, G34

Suggested Citation

Veld, Chris and Veld-Merkoulova, Yulia V., Do Spin-Offs Really Create Value? The European Case (May 22, 2002). Available at SSRN: https://ssrn.com/abstract=296092 or http://dx.doi.org/10.2139/ssrn.296092

Chris Veld (Contact Author)

Monash University ( email )

Building 11E
Clayton, Victoria 3800
Australia

Yulia V. Veld-Merkoulova

Monash University - Department of Finance ( email )

Building H
Caulfield, Victoria 3145
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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