The Performance Effects of European Demergers

Centre for Economic Performance Discussion Paper No. 566

41 Pages Posted: 12 Sep 2003

See all articles by Tom Kirchmaier

Tom Kirchmaier

London School of Economics - Centre for Economic Performance; Copenhagen Business School

Date Written: May 2003

Abstract

This paper examines security price reactions of European demergers. For a period ranging from one and a half years prior to the demerger announcement through to three years after the execution date, the relative performance of the parent, spin-off and the combined effect is analysed relative to the overall market performance. Significant announcement effects were established for a sample of 48 European demergers. In addition, significant positive long-term value creation, in particular in year 2 after the demerger, was found for the spin-off but not for the parent firm. While size has, on average, a decisive but inverse impact on performance for both parent and spin-off, takeover activity does not.

Keywords: Corporate restructuring, demerger, spin-off

JEL Classification: L11, L25, M2

Suggested Citation

Kirchmaier, Tom, The Performance Effects of European Demergers (May 2003). Centre for Economic Performance Discussion Paper No. 566. Available at SSRN: https://ssrn.com/abstract=432000 or http://dx.doi.org/10.2139/ssrn.432000

Tom Kirchmaier (Contact Author)

London School of Economics - Centre for Economic Performance ( email )

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+44 207 955 6854 (Phone)

HOME PAGE: http://https://sites.google.com/site/tomkirchmaier/home

Copenhagen Business School ( email )

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Denmark

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