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Aalto University School of Business Master's Theses are now in the Aaltodoc publication archive (Aalto University institutional repository)
School of Business | Department of Finance | Finance | 2014
Thesis number: 13989
Benefits of corporate spin-offs for companies and their shareholders - Evidence from US markets
Author: Sihvola, Mika
Title: Benefits of corporate spin-offs for companies and their shareholders - Evidence from US markets
Year: 2014  Language: eng
Department: Department of Finance
Academic subject: Finance
Index terms: rahoitus; financing; yhtiöittäminen; spin-offs; osakkaat; stakeholders; divestoinnit; divestments; yritysjärjestelyt; company restructuring
Pages: 70
Key terms: Spin-offs, demerger, divestment, restructuring, corporate focus, industry focus

In this thesis, I study spin-offs from the value creation and motivational point of view. Specifically, this paper studies how spin-offs create value for shareholders and companies during the spin-off announcement period and in the long-run, and whether spin-offs improve companies' profitability on average in the long-run.


My full sample consists of 210 completed spin-off transactions made by US publicly listed companies between January 1994 and April 2014. The spin-off transaction data is collected form S&P Capital IQ database, stock market data is retrieved from Thomson One Banker and financial statement data is from Compustat database. From the full sample, 194 spin-offs are accepted to the short-term announcement period study, 135 to the long-run stock market performance study and 113 to the operational performance study. The announcement period study uses the market model event study method while the long-run stock market and operational performance studies use the matching firm approach.


My findings indicate that, on average, spin-offs create significant value for the companies' shareholders during the announcement period and in the long-run for up to three years following the spin-off. The findings also suggest that, following spin-offs, the demerged companies operationally outperform their matching firms. Further, I find that spin-offs increasing industry focus (i.e. a company spins off a subsidiary operating in a non-core industry) create more value than other spin-offs. To conclude, right kinds of spin-offs create value for the shareholders and offer a possibility for the companies to improve their operational performance.
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