School of Business publications portal
This portal is no longer updated. 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.
Master's theses are stored at Learning Centre in Otaniemi.