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The Long-Term Performance Of Parent Firms And Their Spin-Offs

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  • Byron J. Hollowell

Abstract

This study examines the four-year stock performance of firms that undertake a spin-off. The theoretical motivations for spin-offs have been widely documented in the literature; however, an empirical examination of the aftermarket performance of spin-offs across a protracted bear market remains an unexamined topic. I find that spin-offs and their parents consistently outperform market indices from the closing price on the first day of public trading to their four-year anniversaries. These findings are important because the existence of price patterns during a market correction can serve as an investment hedge within a mean-variance efficient portfolio.

Suggested Citation

  • Byron J. Hollowell, 2009. "The Long-Term Performance Of Parent Firms And Their Spin-Offs," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 3(1), pages 119-129.
    • Handle: RePEc:ibf:ijbfre:v:3:y:2009:i:1:p:119-129
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    References listed on IDEAS

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    Cited by:

    1. Pearce, John A. & Patel, Pankaj C., 2022. "Reaping the financial and strategic benefits of a divestiture by spin-off," Business Horizons, Elsevier, vol. 65(3), pages 291-301.
    2. Naaguesh Appadu & Anna Faelten & Mario Levis, 2013. "Acquisitions, SEOs, divestitures and IPO performance," Chapters, in: Mario Levis & Silvio Vismara (ed.), Handbook of Research on IPOs, chapter 17, pages 347-374, Edward Elgar Publishing.

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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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