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http://ssrn.com/abstract=954791
 
 

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Persistence in Firm Policies, Firm Origin, and Corporate Culture: Evidence from Corporate Spin-offs


Henrik Cronqvist


China Europe International Business School (CEIBS)

Angie Low


Nanyang Technological University - Division of Banking & Finance

Mattias Nilsson


University of Colorado at Boulder - Leeds School of Business

February 12, 2009

EFA 2007 Ljubljana Meetings Paper
Second Singapore International Conference on Finance 2008
Fisher College of Business Working Paper No. 2007-03-001
Charles A. Dice Working Paper No. 2007-1
Robert Day School of Economics and Finance Research Paper No. 2009-2

Abstract:     
We find significant persistence in various investment and financing policies. This persistence survives even the split-up of a firm through a spin-off transaction. We find that spin-off firms choose policies that are more similar to those of their parent firms than to those of their own matched peer firms. This commonality persists over a long period, is not due to inertia of initial policies, and cannot be explained by contractual and economic relationships that remain after the spin-off. We find that the commonality is stronger among internally-grown spin-off firms and those that originate from older parents, and the similarities exist even when a new outside CEO is hired to run the spin-off firm. Our evidence is consistent with theories of "corporate culture," and has implications for interpretations of firm fixed effects and more generally for future research on the impact of a firm's origin on corporate finance policies.

Number of Pages in PDF File: 45

Keywords: Economics of corporate culture, investment policies, financing policies

JEL Classification: G32, G34, G35, L22, L25, Z10

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Date posted: January 4, 2007 ; Last revised: March 15, 2011

Suggested Citation

Cronqvist, Henrik and Low, Angie and Nilsson, Mattias, Persistence in Firm Policies, Firm Origin, and Corporate Culture: Evidence from Corporate Spin-offs (February 12, 2009). EFA 2007 Ljubljana Meetings Paper; Second Singapore International Conference on Finance 2008; Fisher College of Business Working Paper No. 2007-03-001; Charles A. Dice Working Paper No. 2007-1; Robert Day School of Economics and Finance Research Paper No. 2009-2. Available at SSRN: http://ssrn.com/abstract=954791 or http://dx.doi.org/10.2139/ssrn.954791

Contact Information

Henrik Cronqvist (Contact Author)
China Europe International Business School (CEIBS) ( email )
699 Hongfeng Road, Pudong
Shanghai, 201206
China
+86 21-2890-5653 (Phone)
HOME PAGE: http://sites.google.com/site/henrikcronqvist/
Angie Low
Nanyang Technological University - Division of Banking & Finance ( email )
Singapore, 639798
Singapore
Mattias Nilsson
University of Colorado at Boulder - Leeds School of Business ( email )
Campus Box 419
Boulder, CO 80309
United States
+1-303-492-2289 (Phone)
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