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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.

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  • Chris Veld & Yulia V. Veld‐Merkoulova, 2008. "An Empirical Analysis of the Stockholder‐Bondholder Conflict in Corporate Spin‐Offs," Financial Management, Financial Management Association International, vol. 37(1), pages 103-124, March.
    • Handle: RePEc:bla:finmgt:v:37:y:2008:i:1:p:103-124
    DOI: 10.1111/j.1755-053X.2008.00006.x
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    1. Maul, D. & Schiereck, D., 2017. "The bond event study methodology since 1974," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 80723, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    2. Ozbek, O. Volkan, 2020. "The Market Success of Corporate Spin-offs: Do CEO External Directorships, Age, and Their Interactions Matter?," American Business Review, Pompea College of Business, University of New Haven, vol. 23(2), pages 241-259, November.
    3. Luc Renneboog & Peter G. Szilagyi, 2008. "Corporate Restructuring and Bondholder Wealth," European Financial Management, European Financial Management Association, vol. 14(4), pages 792-819, September.
    4. Miriam Flickinger & Miriam Zschoche, 2018. "Corporate divestiture and performance: an institutional view," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 22(1), pages 111-131, March.
    5. 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.
    6. Ying Lin & Kenneth Yung, 2014. "Earnings management and corporate spinoffs," Review of Quantitative Finance and Accounting, Springer, vol. 43(2), pages 275-300, August.
    7. Anupam Nanda & Stephen Ross, 2012. "The Impact of Property Condition Disclosure Laws on Housing Prices: Evidence from an Event Study Using Propensity Scores," The Journal of Real Estate Finance and Economics, Springer, vol. 45(1), pages 88-109, June.
    8. Szilagyi, P.G., 2007. "Corporate governance and the agency costs of debt and outside equity," Other publications TiSEM 9520d40a-224f-43a8-9bf9-b, Tilburg University, School of Economics and Management.
    9. Daniel Chai & Ziyang Lin & Chris Veld, 2018. "Value-creation through spin-offs: Australian evidence," Australian Journal of Management, Australian School of Business, vol. 43(3), pages 353-372, August.

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