Have European spinoffs generated long-run abnormal returns? A study of European spinoffs completed between 1990 and 2020

Abstract

We investigate the long-run abnormal returns of spun-off companies in Europe through a sample of 265 European spinoffs completed between 1990 and 2020. We find that spinoffs have generated long-run abnormal returns the following 24 to 60 months after completion. We observe abnormal returns over the entire sample period, but a fluctuating pattern of abnormal returns for spinoffs throughout the sample period. Further, we see that the smaller companies, measured by market capitalization, significantly outperformed the larger companies. This is in line with existing theory related to size premiums. We don’t find evidence of the lower price/book ratio or focus-increasing spinoffs explaining the observed abnormal returns.