Do spin-offs really create value? The European case

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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.

Original languageEnglish
Pages (from-to)1111-1135
Number of pages25
JournalJournal of Banking and Finance
Issue number5
Publication statusPublished - 1 May 2004
Externally publishedYes


  • Divestitures
  • Event study
  • Industrial focus
  • Long-run excess returns
  • Spin-offs

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