Recovery after Demerger: Evidence from Romanian Companies

Constantin Duguleana,Camelia Mirela Baba,Liliana Duguleana,Cristina Drumea

doi:10.3390/su14031151

Constantin Duguleana, Camelia Mirela Baba + Show 2 more

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https://doi.org/10.3390/su14031151

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Journal: Sustainability	Publication Date: Jan 20, 2022
Citations: 1	License type: CC BY 4.0

Affiliation: Transylvania University of Brașov

Abstract

The paper follows the demerger phenomenon in Romania in order to find out whether companies regain their economic performance after reorganization. The research is based on four samples of companies, divided into 2012, 2013, 2014, and 2015, that recorded their financial indicators in the period from 2005–2019. Using the financial indicators of companies that demerged in the same year, we analyzed the economic performances before and after the demergers, using statistical and econometric methods. The model with the fixed effects of the cross sections proved to be the most suitable for each panel, both for the entire analyzed period and for the two subperiods: ante and post demerger. The subperiod models are better than the panel econometric models for the entire period. The results show that all of the Romanian companies recovered after the demergers, and also to what extents. The validities of the econometric models confirm the sustainability of the economic activities after the demergers. This paper provides a study methodology and econometric models to investigate the demerger phenomenon among Romanian companies.

Highlights

The economic crisis that occurred in 2008 affected the economic activities of Romanian companies, as well as the activities of companies worldwide
By applying the Hausman test, we found that the fixed effects models of cross sections are superior to the random effects models
The demerger phenomenon seems to be underestimated in the economic literature, in the real economic world, can a sanitizing and even a safeguarding role

Summary

Introduction

The economic crisis that occurred in 2008 affected the economic activities of Romanian companies, as well as the activities of companies worldwide. The financial crisis started in Romania at the end of 2008, and it resulted in many companies facing difficulties in their activities. Some of them decided to reorganize themselves and proceeded to partial division and reorganization, sooner rather than later, in order to continue to exist. Companies are merging and dividing all the time in order to obtain better economic results. The 2008 economic crisis was an important reason for making reorganization decisions. The demerger may be seen as the better action in a declining economic framework

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