Do spin-offs affect shareholder wealth?: A study among Swedish publicly traded companies of the share price reaction upon announcement of spin-offs according to Lex ASEA

Sammanfattning: A wide range of international studies have shown that voluntary spin-offs made by publicly traded companies have had significant positive effects on shareholder wealth. However, updated and comprehensive research of the Swedish stock market is not available. The purpose of this thesis is to investigate the effects from Swedish spin-offs on shareholder wealth. This is investigated using an event study, where share price reactions upon announcement of spin-offs during the period May 1991-December 2008 have been studied. The final sample contains 33 spin-offs. In addition, the study investigates whether cross-industry and intra-industry spin-offs, where the parent company and the spun off entity belong to different and the same industry classification, respectively, have different effects on shareholder wealth. The results for the whole sample indicate that spin-offs create statistically significant abnormal returns, amounting to 3.32% upon announcement and 3.42% cumulated for the studied event window. Corresponding returns excluding outliers also display statistical significance and amount to 1.88% upon announcement and 6.65% cumulated over the event window. An analysis of intra-industry versus cross-industry spin-offs indicates that, contrary to prior research, intra-industry spin-offs result in significantly higher cumulative abnormal returns than cross-industry spin-offs for the studied event window, amounting to 13.16%. For the full sample, no difference in abnormal return is observed upon announcement. When adjusting for outliers, intra-industry spin-offs result in significantly higher abnormal returns than cross-industry spin-offs, amounting to 3.00% upon announcement and 8.61% cumulated over the event window. It should however be noted that the final intra-industry and cross-industry samples merely constitute 15 and 17 observations, respectively.