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The Long-Run Performance of Sponsored and Conventional Spin-Offs
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Journal Article
The Long-Run Performance of Sponsored and Conventional Spin-Offs
2010
Overview
A sponsored spin-off takes place when an equity stake in a subsidiary is sold to an outside investor before going public. The stock return performance of a sample of 57 sponsored spin-offs from 1994 to 2005 is significantly negative over a three-year period following the spin-off date. The parent firms' stock performance for the year preceding (following) the spin-off date are below average (average) suggesting that their earlier performances were adversely affected by their subsidiaries and motivated the parents to spin them off We also find that parent firms underinvest in the subsidiary prior to the spin-off which could have motivated the subsidiary to seek outside funding sources before going public.
Publisher
Blackwell Publishing Asia,Wiley Subscription Services,Wiley-Blackwell,Financial Management Association,Blackwell Publishing Ltd
Subject
