We study wealth effects for a sample of 156 spin-offs from 15 different European countries that were announced between January 1987 and September 2000. The cumulative average abnormal return over the 3-day event window is 2.62%. This number increases to 2.66% for the subsequently completed spin-offs. The cumulative average abnormal return is 3.57% for completed spin-offs by companies that increase their industrial focus and only 0.76% for non-focus increasing companies. The difference between these two sub-samples is significantly different from zero. These results are in line with previous studies for the US. The long-run returns in excess of matching firms are mostly insignificant for parents, subsidiaries and pro-forma combined firms. This result suggests that, unlike US spin-offs, European spin-offs are not associated with long-run superior performance.

Divestitures, Event study, Industrial focus, Long-run excess returns, Spin-offs
dx.doi.org/10.1016/S0378-4266(03)00045-1, hdl.handle.net/1765/67778
Journal of Banking & Finance
Erasmus Research Institute of Management

Veld, C, & Merkoulova, Y.V. (2004). Do spin-offs really create value? The European case. Journal of Banking & Finance, 28(5), 1111–1135. doi:10.1016/S0378-4266(03)00045-1