The Performance Implication of Spinoffs

Download or read book The Performance Implication of Spinoffs written by Philipp Otto and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Whereas a number of studies examined the effects of divestitures on parent performance and shareholder wealth, the performance of the divested unit was devoted only little attention in the extant literature. In contrast, the focus of this study is to examine the post-divestiture performance of spin-offs and to identify potentially performance influencing factors. For this reason, various financial performance ratios of a sample of 138 spin-offs that occurred from 1996 till 2007 are tracked for a 3-year period. The results obtained indicate a slight deterioration in the unit's return on assets and asset turnover, reflecting a strongly growing asset base following the divestiture. In particular, this deterioration was observed for previously unrelated units. Moreover, the subsidiary's post-divestiture performance seems to be influenced by liquidity and market based measures. Apart from that, no significant impact on performance was observed.