TITLE:
Spin-Offs and Their Impact on Shareholder Wealth: An Empirical Analysis on the German Capital Market
AUTHORS:
Elmar Steurer, Ernst J. Fahling, Vinzenz Danner
KEYWORDS:
Spin-Off, Germany, Shareholder Wealth
JOURNAL NAME:
Journal of Financial Risk Management,
Vol.10 No.4,
October
29,
2021
ABSTRACT: A parent company occasionally spin-off a subsidiary or a business unit if
this helps to focus on the core business, eliminate a poor performer or reduce
negative synergies in order to improve operational efficiency. Achieving a more
efficient valuation on the capital market can also be a motive for a spin-off.
The assumption is thus that spin-offs increase shareholder wealth. Despite the
high relevance of spin-offs as a restructuring measure, empirical research has
not yet sufficiently addressed this topic. The reasons for this are, on the one
hand, the lack of topicality of publications and, on the other hand, the lack
of consideration of the value effects of spin-offs in the European and, in
particular, the German economic area. Accordingly, there is currently no
adequate literature covering spin-offs in Germany. As a result, this paper
addresses this problem by conducting an analysis of spin-offs in Germany.
Consequently, this paper examines wealth effects for a sample of 8 spin-offs
from Germany announced between January 2010 and February 2021. The cumulative
average abnormal return over the three-day event window [1; +1] is
4.91%.