Announcement effect and the long-term performance of spinoffs: Evidence from Europe

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School of Business | Bachelor's thesis
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Authors

Date

2019

Department

Rahoituksen laitos

Major/Subject

Mcode

Degree programme

Rahoitus

Language

en

Pages

32 + 2

Series

Abstract

This thesis studies the spinoff announcement effect as well as the long-term performance of parent companies and spun off subsidiaries in a sample consisting of 149 European spinoffs completed between 2000 and 2019. The objective is to confirm the abnormal returns associated with the spinoff announcement and analyze the longterm performance in a recent timeframe, while also considering the most relevant theories related thereto. Based on an event study, this thesis finds an average abnormal return of 3,04%, statistically significant at the 1% level, for a three-day event window. Furthermore, this thesis concludes that the observed spinoff announcement effect does not seem to be explained by factors, such as industrial and geographical focus, relative size or the proportion of bank debt, studied in previous research. As for the long-term abnormal returns, this study finds no evidence of significant abnormal performance based on the buy-and-hold abnormal returns for varying timeframes, a result further confirmed by the Fama-French five-factor asset pricing model.

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Thesis advisor

Joenväärä, Juha

Keywords

spinoff announcement, event study, CAR, long-term performance, BHAR, five-factor asset pricing model

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Permanent link to this item

https://urn.fi/URN:NBN:fi:aalto-202001051444

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[kand] Kauppakorkeakoulu / BIZ