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The ongoing contributions of spin-off research and practice to understanding corporate restructuring and wealth creation: $100 billion in 1 decade

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  • James E. Owers

    (Harvard University
    Georgia State University)

  • Bruno S. Sergi

    (Harvard University
    University of Messina)

Abstract

Since the 1980s, analysis of spin-offs has become a key line of inquiry in corporate finance. This paper reviews the theory and empirical research papers about spin-off restructuring and measures the monetary value created by spin-offs. First, we document the valuation impact of spin-offs for the divesting firms and then examine such subtleties as the interesting (positive) ex-dividend day price impact and the myriad other details associated with these transactions. This study provides a review of the now extensive research into spin-off divestitures. It looks into equity price reactions around the announcements of 249 voluntary spin-offs undertaken by US public companies over the interval 2007–2017. The abnormal returns associated with recent spin-off divestitures are of the same order of magnitude as those from the earlier papers, showing the sustained statistical significance and new economic materiality measures. With more firms undertaking spin-offs and the positive abnormal returns continuing to be substantial, the clear implication is that the overall monetary value creation resulting from spin-offs has increased markedly. Finally, and in a first for spin-off research, this paper calibrates the monetary value created by spin-offs despite the voluminous research of the topic. It establishes that spin-offs create large monetary value increments for divesting a firm’s stockholders—almost $100 billion in the interval 2007–2017.

Suggested Citation

  • James E. Owers & Bruno S. Sergi, 2021. "The ongoing contributions of spin-off research and practice to understanding corporate restructuring and wealth creation: $100 billion in 1 decade," Palgrave Communications, Palgrave Macmillan, vol. 8(1), pages 1-8, December.
    • Handle: RePEc:pal:palcom:v:8:y:2021:i:1:d:10.1057_s41599-021-00807-9
    DOI: 10.1057/s41599-021-00807-9
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    References listed on IDEAS

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