Corporate Governance and Restructuring Through Spin-Offs: European Evidence
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Various aspects of corporate governance in the process of corporate restructurings are analyzed using the sample of completed spin-offs in 12 European countries between 1989 and 2005. We show that spin-off decisions are often triggered by firm’s governance earthquakes, such as an appointment of a new CEO or a takeover threat. Abnormal long-run stock returns and operating performance are observed for spin-off firms only and mostly for internally grown business units and parent-related (non-focusing) subsidiaries. We find no evidence that post-spin-off mergers of either parents or subsidiaries enhance long-term performance or that focus-increasing spin-offs lead to efficiency improvements.