Abstract

https://ssrn.com/abstract=954791
 
 

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Persistence in Firm Policies, Firm Origin, and Corporate Culture: Evidence from Corporate Spin-offs


Henrik Cronqvist


University of Miami - Department of Finance

Angie Low


Nanyang Technological University - Division of Banking & Finance

Mattias Nilsson


U.S. Securities and Exchange Commission

February 12, 2009

EFA 2007 Ljubljana Meetings Paper
Second Singapore International Conference on Finance 2008
Fisher College of Business Working Paper No. 2007-03-001
Charles A. Dice Working Paper No. 2007-1
Robert Day School of Economics and Finance Research Paper No. 2009-2

Abstract:     
We find significant persistence in various investment and financing policies. This persistence survives even the split-up of a firm through a spin-off transaction. We find that spin-off firms choose policies that are more similar to those of their parent firms than to those of their own matched peer firms. This commonality persists over a long period, is not due to inertia of initial policies, and cannot be explained by contractual and economic relationships that remain after the spin-off. We find that the commonality is stronger among internally-grown spin-off firms and those that originate from older parents, and the similarities exist even when a new outside CEO is hired to run the spin-off firm. Our evidence is consistent with theories of "corporate culture," and has implications for interpretations of firm fixed effects and more generally for future research on the impact of a firm's origin on corporate finance policies.

Number of Pages in PDF File: 45

Keywords: Economics of corporate culture, investment policies, financing policies

JEL Classification: G32, G34, G35, L22, L25, Z10


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Date posted: January 4, 2007 ; Last revised: March 15, 2011

Suggested Citation

Cronqvist, Henrik and Low, Angie and Nilsson, Mattias, Persistence in Firm Policies, Firm Origin, and Corporate Culture: Evidence from Corporate Spin-offs (February 12, 2009). EFA 2007 Ljubljana Meetings Paper; Second Singapore International Conference on Finance 2008; Fisher College of Business Working Paper No. 2007-03-001; Charles A. Dice Working Paper No. 2007-1; Robert Day School of Economics and Finance Research Paper No. 2009-2. Available at SSRN: https://ssrn.com/abstract=954791 or http://dx.doi.org/10.2139/ssrn.954791

Contact Information

Henrik Cronqvist (Contact Author)
University of Miami - Department of Finance ( email )
P.O. Box 248094
Coral Gables, FL 33124-6552
United States
(305) 515-5898 (Phone)
HOME PAGE: http://sites.google.com/site/henrikcronqvist/
Angie Low
Nanyang Technological University - Division of Banking & Finance ( email )
Singapore, 639798
Singapore
Mattias Nilsson
U.S. Securities and Exchange Commission ( email )
United States Securities and Exchange Commission
100 F Street NE
Washington, DC 20549
United States
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