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The Performance Effects of European Demergers

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  • Thomas Kirchmaier

Abstract

This paper examines security price reactions of European demergers. For a period ranging from one and a half years prior to the demerger announcement through to three years after the execution date, the relative performance of the parent, spin-off and the combined effect is analysed relative to the overall market performance. Significant announcement effects were established for a sample of 48 European demergers. In addition, significant positive long-term value creation, in particular in year 2 after the demerger, was found for the spin-off but not for the parent firm. While size has, on average, a decisive but inverse impact on performance for both parent and spin-off, takeover activity does not.

Suggested Citation

  • Thomas Kirchmaier, 2003. "The Performance Effects of European Demergers," CEP Discussion Papers dp0566, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0566
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    File URL: http://cep.lse.ac.uk/pubs/download/dp0566.pdf
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    References listed on IDEAS

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    Keywords

    Corporate restructuring; demerger; spin-off;
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