Value Creation Through Spin-Offs: A Review of the Empirical Evidence

28 Pages Posted: 31 May 2006 Last revised: 17 Apr 2008

See all articles by Chris Veld

Chris Veld

Monash University

Yulia V. Veld-Merkoulova

Monash University - Department of Finance; Financial Research Network (FIRN)

Date Written: March 26, 2008


This paper reviews the literature on the factors that influence the wealth effects associated with the announcements of corporate spin-offs. We use meta-analysis to summarize the findings of 26 event studies on spin-off announcements. We find a significantly positive average abnormal return of 3.02% during the event window. Returns are higher for larger spin-offs, for divestments that are tax or regulatory friendly and for spin-offs that lead to the divestiture of a non-related division. We also find that spin-offs that are later completed are associated with lower abnormal returns than non-completed spin-offs. In the second part of the paper we overview studies on the long-run stock price performance of spin-offs. Even though early studies find a long-run superior performance, this effect is no longer found in later studies that use more refined statistical tests.

Keywords: spin-offs, demergers, value creation, event study, meta-analysis, long-run excess returns, industrial focus

JEL Classification: G32, G34

Suggested Citation

Veld, Chris and Veld-Merkoulova, Yulia V., Value Creation Through Spin-Offs: A Review of the Empirical Evidence (March 26, 2008). Available at SSRN: or

Chris Veld (Contact Author)

Monash University ( email )

Building 11E
Clayton, Victoria 3800

Yulia V. Veld-Merkoulova

Monash University - Department of Finance ( email )

Building H
Caulfield, Victoria 3145

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane

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