Malaysian Corporate Spin-Offs: Wealth Redistribution Relations with Debt and Liquidity

32 Pages Posted: 13 Jan 2014 Last revised: 17 Mar 2014

See all articles by Yoon Wei

Yoon Wei

University Putra Malaysia

Annuar Nassir

University Putra Malaysia

Yoon Chung Sin

University Putra Malaysia

Date Written: January 11, 2014

Abstract

The reviewed corporate spin-offs studies mostly in US, delved into wealth impact in the stock market. Different researchers espouse wealth creation on the various market models. This study also examines the wealth impacts of spin-off events, but in Malaysia, an emerging market place which is rare and further analyses the links between the wealth impact and parent company’s pre-event debt levels and post-event liquidity position to explain wealth redistribution from debtors to shareholders due to spin-offs. Using Market Model, we found wealth impacts are generally positive. Whilst, after regrouping the sample based on their performance level, we observed that the impact materialised through cumulative positive abnormal returns prior and after the event as well as reduced trend in abnormal lost post spin-off. Whereas, wealth redistribution effect is only apparent in poorly performed firms where a strong positive relationship between Cumulative Abnormal Return and debt levels is found, but not for firms that have good financial health thus the ability to repay debts.

Keywords: Corporate Spin-offs, Wealth impacts, Market Model, Financial Ratios, Debt Restructure and Improved Liquidity

Suggested Citation

Wei, Yoon and Nassir, Annuar and Alan, Yoon Chung Sin, Malaysian Corporate Spin-Offs: Wealth Redistribution Relations with Debt and Liquidity (January 11, 2014). 2014 Financial Markets & Corporate Governance Conference, Available at SSRN: https://ssrn.com/abstract=2377786 or http://dx.doi.org/10.2139/ssrn.2377786

Yoon Wei (Contact Author)

University Putra Malaysia ( email )

Serdang, Selangor 43400
Malaysia
016-6260310 (Phone)

Annuar Nassir

University Putra Malaysia ( email )

Selangor Darul Ehsan
Serdang, Selangor 43400
Malaysia

Yoon Chung Sin Alan

University Putra Malaysia ( email )

Selangor Darul Ehsan
Serdang, Selangor 43400
Malaysia

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