The Effects of Corporate Spin-offs on Productivity

70 Pages Posted: 17 Mar 2006 Last revised: 15 Apr 2016

See all articles by Thomas J. Chemmanur

Thomas J. Chemmanur

Boston College - Carroll School of Management

Karthik Krishnan

Northeastern University

Debarshi K. Nandy

Brandeis University - International Business School

Date Written: April 7, 2014


Using a unique sample of plant level data from the Longitudinal Research Database of the U.S. Census Bureau, which enables us to correctly identify the parent and spun-off entities prior to spin-offs, we establish that efficiency improves following spin-offs. A spin-off refers to the separation of the management of some assets of a firm into a separate entity (which we term as the spun-off entity or subsidiary). Using treatment effect estimators and propensity score matching in our analysis, we identify, how (the precise channel and mechanism), where (parent or subsidiary), and when (the dynamic pattern) efficiency improvements arise following spin-offs. We show that spin-offs increase total factor productivity (TFP) and that such productivity improvements are long-lived. This post spin-off productivity improvement can be attributed to cost savings but not to higher sales and arise primarily in plants remaining with the parent. However, contrary to speculation in the previous literature, we show that plants that are spun-off do not underperform parent plants prior to the spin-off. We identify acquisitions following spin-offs and find that while productivity improvements occur immediately after the spin-off in the non-acquired plants, in the acquired plants they start only after being taken over by another firm. Finally, we show that unrelated spun-off entities show greater improvements in productivity compared to related spun-off entities.

Keywords: Spin-offs, Restructuring, Total Factor Productivity (TFP), Employment, Wages

JEL Classification: G30, G34

Suggested Citation

Chemmanur, Thomas J. and Krishnan, Karthik and Nandy, Debarshi K., The Effects of Corporate Spin-offs on Productivity (April 7, 2014). Journal of Corporate Finance, Forthcoming, Available at SSRN: or

Thomas J. Chemmanur

Boston College - Carroll School of Management ( email )

Finance Department, 436 Fulton Hall
Carroll School of Management, Boston College
Chestnut Hill, MA 02467-3808
United States
617-552-3980 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://

Karthik Krishnan

Northeastern University ( email )

360 Huntington Avenue
414C Hayden Hall
Boston, MA 02115
United States
617-373-4707 (Phone)


Debarshi K. Nandy (Contact Author)

Brandeis University - International Business School ( email )

Mailstop 32
Waltham, MA 02454-9110
United States

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