Value Drivers of Shareholder Wealth Effects Through Corporate Spin-offs: A Single-case Study of the Arjo Spin-off

Sofia Casserlöv & Alexandra Wiklund

Student thesis: Master thesis

Abstract

This empirical study analyzes the value drivers of shareholder wealth effects following a spinoff of a company active in the medical device market, namely Arjo. By conducting a single-case study with a qualitative research approach, the aim is to provide more in-depth research for spun-off units. The authors examine the three most commonly investigated sources of spin-off value creation; information asymmetry, capital allocation and corporate focus. The authors find that reduced information asymmetry following the spin-off of Arjo can possibly explain the positive share return. The main reasons are attributed to the improved opportunity of estimating the true prospects of the firm and an increased managerial efficiency. Additionally, the authors find that increased corporate focus has had a positive impact on the shareholder wealth effects after the spin-off. Reasons for such effects include a reduction in negative synergies due to an increased ability to focus on important customers and resources closer to the firm’s core business. However, the authors are unable to secure a relationship between improved capital allocation and shareholder wealth effects following the spin-off. The findings support the view that transparency of firms and focus on core business activities are generally appreciated by external stakeholders, affecting the shareholder wealth effects positively. However, the findings related to capital allocation contradict with those of previous research.

EducationsMSc in Accounting, Strategy and Control, (Graduate Programme) Final ThesisMSc in Finance and Investments, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2019
Number of pages125
SupervisorsSvend Peter Malmkjær