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Do financial synergies explain corporate spin-offs?

Maggi, Damiano; Haugen, Lars Andreas
Master thesis
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URI
http://hdl.handle.net/11250/2487349
Date
2017
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  • Master of Science [1555]
Abstract
This paper investigates the role of financial synergies as precursors of spin-offs.

Our sample includes 106 parent firms that spun-off a subsidiary during the period

1983-2015. The results highlight that negative financial synergies do not have a

statistically significant impact on the spin-off likelihood. Correlation among firms,

however, significantly influences the choice to spin-off a subsidiary. While the results

are insignificant, the trend shows that when present, negative financial synergies

can increase the probability of spinning-off a subsidiary up to four percent.

Correlation among firms significantly affects the probability: an increase of one

quartile can impact the spin-off likelihood up to fifteen percent. In addition, this

paper touches upon the relationship between financial synergies and total leverage.

Looking at the relation between financial synergies and leverage, parent and target

firms with negative financial synergies increased their joint leverage more than parent

and target firms with positive financial synergies. Nevertheless, the low number

of data points in our sample impacts the statistical significance of this trend. While

in this current sample financial synergies seem not to have any material impact, these

results are promising for further research.

Keywords: Financial synergies; Spin-off; Restructuring

JEL classifications: G30, G34, G39
Description
Masteroppgave(MSc) in Master of Business, Handelshøyskolen BI, 2017 Masteroppgave(MSc) in Master of Science in Finance - Handelshøyskolen BI, 2017
Publisher
BI Norwegian Business School

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