Shareholder Value Creation through Corporate Spin-Offs in Europe—An Empirical Analysis

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Through a spin-off of a business unit, the parent company aims to have a positive impact on its enterprise value. The parent company often pursues the spin-off transaction to strengthen the focus on its core business, reduce negative synergies and increase operational efficiency. Based on studies already established in the literature, it is assumed that the spin-off transaction increases shareholder wealth. Despite the high relevance of spin-offs as restructuring measure, empirical research in Europe has not sufficiently addressed this issue yet. Accordingly, this paper examines both the short-term effects of a spin-off announcement for the parent company and the long-term effects of the implementation of the spin-off at the level of the parent company and the spin-off company on the European capital market. A sample of 24 European companies is examined. The time horizon of the empirical research is from January 2015 to December 2020. For the short-term study, five event windows were chosen around the announcement date and for the long-term study, 3 event periods were chosen over 3, 6 and 12 months after the spin-off transaction. The short-term examination of parent companies yields a cumulative average abnormal return over the investigated event windows around the announcement date of 3.40%. In the long-term research, the parent company generates a buy-and-hold average abnormal return over the studied event periods after the implementation of the spin-off transaction of ?4.11%. The spin-off companies generate a buy-and-hold average abnormal return of 13.76% in the same event periods.