Corporate spin-offs på det vesteuropæiske aktiemarked: Et empirisk eventstudie på det vesteuropæiske marked fra 2007-2022

Jakob Rasmussen & Mads Dalgaard Jensen

Student thesis: Master thesis

Abstract

This study aims to investigate the impact of voluntary corporate spin-offs on abnormal returns on the Western European stock market in the period 2007-2022. Subsequently, this study seeks to uncover the differences between the European and American stock markets. Therefore, its results will be put into context with the American stock market. This study examines 114 corporate spin-offs and analyzes the short-term and long-term effects on abnormal returns.

The abnormal returns shown in this study are positive and significant in the short term, specifically in the time intervals (-1, +1), (-5, +5) and (-10, +10), where the true announcement effect in (-1, +1) is 5.08 %. These announcement effects are calculated with the methodology of event studies by using Market Model and CAAR. This study concludes that the European stock market reacts positively to the announcement of spin-offs. In the short term, the three key driving factors, corporate focus, geographic focus and relative size of spin-off are all affecting the abnormal returns. The study has found that a change in corporate focus, an unchanged geographic focus, and a large spin-off have a significant and positive impact on abnormal returns. Therefore, in the short term, if a company performs a spin-off that fulfills all three factors, it will have the best opportunity for achieving a higher abnormal return. Comparing its results to a similar study on the US stock market, it shows a difference of 2.02 percentage points, and therefore the study concludes that it reflects the actual difference between the US and European markets.
Regarding long-term effects, this study has positive and significant results in T36 and T48. The abnormal returns for parent companies are 17.64 % and 35.15 %, for spin-offs 46.93 % and 68.98 %, and for proforma 27.04 % and 44.83 %. In addition, the long-term effects are also calculated with the methodology of event studies by using Index Model and ABHAR. The study concludes that the European stock market reacts positively to spin-offs in the long term.

In addition, in the long term, the three key driving factors are also affecting the abnormal returns. This study found that a change in corporate focus has a positive and significant impact on parent companies and proforma. Additionally, an unchanged geographic focus has a positive and significant impact only on spin-offs. Finally, larger spin-off transactions result in positive and significant abnormal returns for all three divisions. Thus, when a company performs a spin-off, the explained factors will affect abnormal returns in their respective ways.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2023
Number of pages112
SupervisorsPeter Belling