Shareholder Wealth Effects of Corporate Spin-Offs: The Worldwide Experience 1990-1998

Abstract

This paper examines the effect of the initial spinoff announcement on shareholder wealth by means of an ex ante study. The event study is based on a sample of 210 worldwide spinoff announcements in the period 1990 to 1998. A Positive return of 2.6 % (3-day Cumulative abnormal return) is reported, consistent with previous studies. The results are compared across geographic regions and between completed and pending spinoffs. Moreover, evidence is provided for improved focus, the tax-status of the transaction and relative size of the spinoff as predictors for the wealth gain from spinoffs.

JEL Classification: G14, G15, G34, F21