The aim of this paper is to contribute to the current discussion regarding the profitability of s... more The aim of this paper is to contribute to the current discussion regarding the profitability of spinoffs in the Swedish stock market. We investigate whether it is more profitable to invest in a portfolio consisting of spinoffs than it is to invest in the general stock market. We do this by comparing the stock returns of our sample consisting of 56 spin offs throughout the time period 1991-2016 with the return of OMXSPI for the same time period in order to determine which one has generated the superior returns. We use OMXSPI as a benchmark as it covers the entire stock market in Sweden and not just the large cap companies like OMXS30 does. To examine this, we use a series of calculations and statistical t-tests to test the validity of our findings. Our data suggests that both alternatives appear to have been profitable during the time period in question, however when comparing the returns, the OMXSPI underperform the Spinoff portfolio in terms of overall stock return performance. In practice, with a buy and hold strategy, the spin off portfolio outperformed the index over a 6, 12, 24 and 36-month period after the first initial day of trading by 9,52%, 43,22% 82,58% and 139,04% respectively. Moreover, given the results we obtained, it follows that the stock returns are more apparent when a subsidiary is spun off from its parent company, as this allows them to set their own course toward growth and profitability. Moreover, Pearson (1998) argues that in many cases it may not be optimal to operate the parent and the subsidiary under the same roof as this could mean that both the fundamental value of the core business and the full growth value of the smaller business are not fully reflected in the share price of the combined company. This entails that a spin off can prove to give a business additional incentives to thrive while simultaneously increasing shareholder value.
The aim of this paper is to contribute to the current discussion regarding the profitability of s... more The aim of this paper is to contribute to the current discussion regarding the profitability of spinoffs in the Swedish stock market. We investigate whether it is more profitable to invest in a portfolio consisting of spinoffs than it is to invest in the general stock market. We do this by comparing the stock returns of our sample consisting of 56 spin offs throughout the time period 1991-2016 with the return of OMXSPI for the same time period in order to determine which one has generated the superior returns. We use OMXSPI as a benchmark as it covers the entire stock market in Sweden and not just the large cap companies like OMXS30 does. To examine this, we use a series of calculations and statistical t-tests to test the validity of our findings. Our data suggests that both alternatives appear to have been profitable during the time period in question, however when comparing the returns, the OMXSPI underperform the Spinoff portfolio in terms of overall stock return performance. In practice, with a buy and hold strategy, the spin off portfolio outperformed the index over a 6, 12, 24 and 36-month period after the first initial day of trading by 9,52%, 43,22% 82,58% and 139,04% respectively. Moreover, given the results we obtained, it follows that the stock returns are more apparent when a subsidiary is spun off from its parent company, as this allows them to set their own course toward growth and profitability. Moreover, Pearson (1998) argues that in many cases it may not be optimal to operate the parent and the subsidiary under the same roof as this could mean that both the fundamental value of the core business and the full growth value of the smaller business are not fully reflected in the share price of the combined company. This entails that a spin off can prove to give a business additional incentives to thrive while simultaneously increasing shareholder value.
The aim of this paper is to contribute to the current discussion regarding the profitability of s... more The aim of this paper is to contribute to the current discussion regarding the profitability of spinoffs in the Swedish stock market. We investigate whether it is more profitable to invest in a portfolio consisting of spinoffs than it is to invest in the general stock market. We do this by comparing the stock returns of our sample consisting of 56 spin offs throughout the time period 1991-2016 with the return of OMXSPI for the same time period in order to determine which one has generated the superior returns. We use OMXSPI as a benchmark as it covers the entire stock market in Sweden and not just the large cap companies like OMXS30 does. To examine this, we use a series of calculations and statistical t-tests to test the validity of our findings. Our data suggests that both alternatives appear to have been profitable during the time period in question, however when comparing the returns, the OMXSPI underperform the Spinoff portfolio in terms of overall stock return performance. In practice, with a buy and hold strategy, the spin off portfolio outperformed the index over a 6, 12, 24 and 36-month period after the first initial day of trading by 9,52%, 43,22% 82,58% and 139,04% respectively. Moreover, given the results we obtained, it follows that the stock returns are more apparent when a subsidiary is spun off from its parent company, as this allows them to set their own course toward growth and profitability. Moreover, Pearson (1998) argues that in many cases it may not be optimal to operate the parent and the subsidiary under the same roof as this could mean that both the fundamental value of the core business and the full growth value of the smaller business are not fully reflected in the share price of the combined company. This entails that a spin off can prove to give a business additional incentives to thrive while simultaneously increasing shareholder value.
The aim of this paper is to contribute to the current discussion regarding the profitability of s... more The aim of this paper is to contribute to the current discussion regarding the profitability of spinoffs in the Swedish stock market. We investigate whether it is more profitable to invest in a portfolio consisting of spinoffs than it is to invest in the general stock market. We do this by comparing the stock returns of our sample consisting of 56 spin offs throughout the time period 1991-2016 with the return of OMXSPI for the same time period in order to determine which one has generated the superior returns. We use OMXSPI as a benchmark as it covers the entire stock market in Sweden and not just the large cap companies like OMXS30 does. To examine this, we use a series of calculations and statistical t-tests to test the validity of our findings. Our data suggests that both alternatives appear to have been profitable during the time period in question, however when comparing the returns, the OMXSPI underperform the Spinoff portfolio in terms of overall stock return performance. In practice, with a buy and hold strategy, the spin off portfolio outperformed the index over a 6, 12, 24 and 36-month period after the first initial day of trading by 9,52%, 43,22% 82,58% and 139,04% respectively. Moreover, given the results we obtained, it follows that the stock returns are more apparent when a subsidiary is spun off from its parent company, as this allows them to set their own course toward growth and profitability. Moreover, Pearson (1998) argues that in many cases it may not be optimal to operate the parent and the subsidiary under the same roof as this could mean that both the fundamental value of the core business and the full growth value of the smaller business are not fully reflected in the share price of the combined company. This entails that a spin off can prove to give a business additional incentives to thrive while simultaneously increasing shareholder value.
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