Spinoff announcement returns and long-term stock market performance: Evidence from the US

Abstract

This paper examines the announcement effect of 140 spinoffs by 131 US parent firms between 2010 and 2022 as well as the long-term abnormal returns of parent firms and spun off subsidiaries. This study finds a 3,63% average cumulative abnormal return around the spinoff announcement. The main factors to drive the observed gains from the spinoff announcement appear to be an increase in industrial focus and the relative size of the spinoff. In addition, this study finds no abnormal long-term returns for parent companies and spun off subsidiaries during the 36-month period after the completion of the spinoff. Overall, the results of this thesis are consistent with previous literature indicating that spinoffs create shareholder value.