Restructuring through spinoffs : the effect on shareholder wealth

Abstract

This paper investigates the shareholder wealth created through spinoff restructuring at Oslo Stock Exchange, over the period 1991-2010. By using a proxy for the transaction announcement, I find no support for an abnormal return in this period except for small fraction spinoffs. However, significant positive abnormal returns over a period reaching from 231 trading days before the spinoff until the first day of separate trading for the divested firms, is documented for cross-industry transactions, small fraction transactions as well as my whole sample. The study also provides significant results of long-run post abnormal returns for the spun-off companies up until 756 trading days after the divestiture. Finally, I find the portfolios of respectively small fraction- as well as own-industry spinoffs, to perform significantly better than their counterparts of large fraction- and cross-industry spinoffs.