An empirical analysis of the stockholder-bondholder conflict in corporate spin-offs

Christianus Henricus Veld; Joulia Wiktorowna Veld-Merkoulova

doi:10.1111/j.1755-053X.2008.00006.x

An empirical analysis of the stockholder-bondholder conflict in corporate spin-offs

Christianus Henricus Veld, Joulia Wiktorowna Veld-Merkoulova

Research output: Contribution to journal › Article › Research › peer-review

22 Citations (Scopus)

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.

Original language	English
Pages (from-to)	103 - 124
Number of pages	22
Journal	Financial Management
Volume	37
Issue number	1
DOIs	https://doi.org/10.1111/j.1755-053X.2008.00006.x
Publication status	Published - 2008
Externally published	Yes

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10.1111/j.1755-053X.2008.00006.x

Cite this

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title = "An empirical analysis of the stockholder-bondholder conflict in corporate spin-offs",

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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