Withdrawn Spin-Offs: An Empirical Analysis

Posted: 20 Nov 2000

See all articles by Kenneth Yung

Kenneth Yung

Old Dominion University - Finance

Kasim Alli

Clark Atlanta University

Gabriel G. Ramirez

Kennesaw State University - Michael J. Coles College of Business

Abstract

We examine market reaction to corporate spin-offs that are eventually withdrawn. These spin-offs do not experience the significant positive share price response reported for spin-offs generally. The overall market reaction to both the initial spin-off announcement and the withdrawal announcement is not significant. When a reason is provided for withdrawing a spin-off, there is a significant positive market reaction, otherwise, there is a significant negative reaction. Firms that withdraw a spin-off without stating a reason experience significant deterioration in industry-adjusted operating performance in the three years following the withdrawal. These results indicate the market is able to anticipate the viability of withdrawn spin-offs at the time of the initial announcement.

JEL Classification: G34

Suggested Citation

Yung, Kenneth and Alli, Kasim Lekan and Ramirez, Gabriel G., Withdrawn Spin-Offs: An Empirical Analysis. The Journal of Financial Research. Available at SSRN: https://ssrn.com/abstract=244848

Kenneth Yung (Contact Author)

Old Dominion University - Finance ( email )

School of Business and Public Administration
Norfolk, VA 23529-0222
United States
757-683-3573 (Phone)

Kasim Lekan Alli

Clark Atlanta University

223 James P. Brawley
Atlanta, GA 30314
United States

Gabriel G. Ramirez

Kennesaw State University - Michael J. Coles College of Business ( email )

1000 Chastain Road
Kennesaw, GA 30144
United States
770-423-6181 (Phone)

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