Value-Creation Through Spin-Offs: Australian Evidence

Posted: 2 Jun 2020

See all articles by Daniel Chai

Daniel Chai

Monash University

Ziyang Lin

affiliation not provided to SSRN

Chris Veld

Monash University

Date Written: November 10, 2017

Abstract

We examine announcement effects and the long-run stock performance associated with spin-offs for companies listed on the Australian Securities Exchange. The 3-day announcement effect is a significantly positive 2.93%. Contrary to previous studies, we find no differences between ex post completed and non-completed spin-off announcements. The abnormal returns do not seem to be related to factors 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. There is some evidence that Australian spin-offs are associated with a positive long-run excess stock performance for up to 24 months after the spin-off. This effect is mostly driven by focus-increasing spin-offs.

Keywords: Bank debt, demergers, industrial focus, information asymmetry, spin-offs

Suggested Citation

Chai, Daniel and Lin, Ziyang and Veld, Chris, Value-Creation Through Spin-Offs: Australian Evidence (November 10, 2017). Australian Journal of Management, Vol. 43, No. 3, 2017, Available at SSRN: https://ssrn.com/abstract=3592430

Daniel Chai (Contact Author)

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Ziyang Lin

affiliation not provided to SSRN

Chris Veld

Monash University ( email )

Building 11E
Clayton, Victoria 3800
Australia

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