Value-Creation Through Spin-Offs: Australian Evidence

28 Pages Posted: 1 Sep 2016

See all articles by Daniel Chai

Daniel Chai

Monash University

Ken Lin

Independent

Chris Veld

Monash University

Date Written: August 31, 2016

Abstract

We examine announcement effects and the long-run stock performance associated with spin-offs for companies listed on the Australian Securities Exchange (ASX). The 3-day announcement effect is a significantly positive 2.93%. Contrary to previous studies, we do not find any difference between ex post completed and non-completed spin-off announcements. The abnormal returns do not seem to be related to factors that were found significant in previous studies such as an increase in industrial or geographical focus, information asymmetry, and the amount of bank debt of the parent company. Australian spin-offs are associated with a positive long-run excess stock performance for up to 36 months after the spin-off. This effect is particularly strong for focus-increasing spin-offs.

Keywords: spin-offs; demergers; industrial focus; bank debt; information asymmetry

JEL Classification: G32; G34

Suggested Citation

Chai, Daniel and Lin, Ken and Veld, Chris, Value-Creation Through Spin-Offs: Australian Evidence (August 31, 2016). Available at SSRN: https://ssrn.com/abstract=2832528 or http://dx.doi.org/10.2139/ssrn.2832528

Daniel Chai

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Ken Lin

Independent ( email )

Chris Veld (Contact Author)

Monash University ( email )

Building 11E
Clayton, Victoria 3800
Australia

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