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An Empirical Analysis of the Stockholder-Bondholder Conflict in Corporate Spin-Offs

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  • Chris Veld
  • Yulia V. Veld-Merkoulova

Abstract

"We analyze the effect of daily stock and bond abnormal returns around spin-off announcements. Over a three-day event window, we find statistically significant abnormal returns of 3.07% for stocks and 0.11% for straight bonds. Both stock and bond abnormal returns are higher for firms with lower interest and dividend payouts. Stock abnormal returns are also higher for firms with higher pre-spin-off leverage. Overall, we find that the firm value increase compensates for the wealth transfer effect and that bondholders' wealth is not reduced as a result of spin-off." Copyright 2008 Financial Management Association International..

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Bibliographic Info

Article provided by Financial Management Association International in its journal Financial Management.

Volume (Year): 37 (2008)
Issue (Month): 1 (03)
Pages: 103-124

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Handle: RePEc:bla:finmgt:v:37:y:2008:i:1:p:103-124

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Cited by:
  1. Luc Renneboog & Peter G. Szilagyi, 2008. "Corporate Restructuring and Bondholder Wealth," European Financial Management, European Financial Management Association, vol. 14(4), pages 792-819.
  2. Bardong, Florian & Bartram, Söhnke M. & Yadav, Pradeep K., 2006. "The Effect of Corporate Break-ups on Information Asymmetry: A Market Microstructure Analysis," MPRA Paper 13155, University Library of Munich, Germany, revised 26 Oct 2008.
  3. Ying Lin & Kenneth Yung, 2014. "Earnings management and corporate spinoffs," Review of Quantitative Finance and Accounting, Springer, vol. 43(2), pages 275-300, August.
  4. Thomas H. Thompson & Vince Apilado, 2010. "Second-stage events and bondholder wealth," Managerial Finance, Emerald Group Publishing, vol. 36(2), pages 103-121, February.
  5. Szilagyi, P.G., 2007. "Corporate Governance and the Agency Costs of Debt and Outside Equity," Open Access publications from Tilburg University urn:nbn:nl:ui:12-321510, Tilburg University.

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