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European spin-offs Origin, value creation, and long-term performance

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  • Dmitri Boreiko

    () (Free University of Bolzano†Bozen, School of Economics and Management.)

  • Maurizio Murgia

    () (Free University of Bolzano†Bozen, School of Economics and Management.)

Abstract

This paper tests the empirical validity of theoretical predictions on corporate spin-offs motivations and ex-post performance. Using a unique data set of completed spinoffs in twelve European countries we show that spin-off decisions are frequently triggered by firm’s governance changes, such as the appointment of a new CEO or a takeover threat. Post-transaction long-run stock returns and operating performance are observed for spin-off firms only, and mostly for internally-grown business units and parent-related (non-focusing) subsidiaries. We find no evidence that post-spin-off mergers of either parents or subsidiaries enhance long-term performance, or that focus-increasing spin-offs lead to efficiency improvements.

Suggested Citation

  • Dmitri Boreiko & Maurizio Murgia, 2013. "European spin-offs Origin, value creation, and long-term performance," BEMPS - Bozen Economics & Management Paper Series BEMPS05, Faculty of Economics and Management at the Free University of Bozen.
  • Handle: RePEc:bzn:wpaper:bemps05
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    File URL: http://pro1.unibz.it/projects/economics/repec/bemps05.pdf
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    Keywords

    Spin-offs; Long-run performance; European corporate finance.;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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