Journal of Financial Economics Vol. 12 No. 4 1983
Security price reactions around corporate spin-off announcements
Abstract
We examine security price reactions around the announcements of 123 voluntary spin-offs by 116 firms between 1963 and 1981 involving a pro-rata distribution of the common stock of a subsidiary to the stockholders of the parent firm. The median spin-off in the sample is 6.6% of the original equity value and is associated with an abnormal return of 7.0% from 50 days prior to the announcement through completion of the spin-off. No evidence is found to indicate the gains to stockholders represent wealth transfers from senior securityholders. Over the entire event period we find positive gains for firms engaging in spin-offs to facilitate mergers or to separate diverse operating units but negative returns to firms responding to legal and/or regulatory difficulties. In the two-day interval surrounding the first press announcement we find positive average excess returns for all groups.
- DOI
- 10.1016/0304-405x(83)90042-9
- Volume
- 12
- Issue
- 4
- Pages
- 409-436
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib