Value creation from spin-offs: European evidence over 1998 - 2015

Sammanfattning: We investigate the short term and long term abnormal returns of spin-offs over the 1998 - 2015 period by measuring the abnormal returns for parents at announcement and abnormal returns for spin-offs and their parent firms for periods of up to three years following the completion of the spin-off. The research is performed by event study of parent firm return around the announcement of the spin-offs and by benchmark portfolios of parent and subsidiaries against the Fama-French three-factor model. The abnormal returns for parent firms are also controlled for industry focus, relative size of spin-off and information asymmetry. Subsidiary abnormal returns are controlled for take-over activity after completion. As expected we find significant abnormal return for the parent in the three-day interval around the announcement of 1.86%, further we also find that abnormal returns for subsidiaries after completion of spin-off are positive and significant. None of the control variables shows predicted and consistent performance not in the short run nor in the long run.