Spin-offs and Operating Performance
This study examines the relation between changes in industry-adjusted operating performance associated with corporate spin-offs and the market’s assessment of the spin-off as either a value increasing or value decreasing activity. I find that the average change in industry-adjusted operating perform...
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| Main Authors: | , , |
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| Format: | text |
| Language: | English |
| Published: |
Institutional Knowledge at Singapore Management University
2012
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| Subjects: | |
| Online Access: | https://ink.library.smu.edu.sg/lkcsb_research/3391 https://ink.library.smu.edu.sg/context/lkcsb_research/article/4390/viewcontent/Spinoffs_OP_2012_pvoa.pdf |
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| Institution: | Singapore Management University |
| Language: | English |
| Summary: | This study examines the relation between changes in industry-adjusted operating performance associated with corporate spin-offs and the market’s assessment of the spin-off as either a value increasing or value decreasing activity. I find that the average change in industry-adjusted operating performance associated with my sample of spin-offs is not significantly different from zero. However, I also present evidence suggesting that this average result is misleading because some spin-offs appear to be value increasing while others are value decreasing. I establish that a positive and significant relation exists between parent company revaluation and a) the change in industry-adjusted operating performance of the combined but independent units, and, b) whether the parent and spun-off unit operated in different lines of business. Tests for the sensitivity of the results to underlying assumptions show that these results are robust. I conclude that some spin-offs create value, especially those in which the parent and the unit spun-off are in unrelated lines of business. However, I also conclude that some spin-offs destroy value. |
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