Restructuring through spin-off: impact on shareholder wealth

Puja Aggarwal (Department of Finance, Institute of Management Technology, Ghaziabad, India) (LM Thapar School of Management, Thapar Institute of Engineering and Technology, Patiala, India)
Sonia Garg (Department of Finance, LM Thapar School of Management, Thapar Institute of Engineering and Technology, Patiala, India)

Managerial Finance

ISSN: 0307-4358

Publication date: 11 March 2019



The purpose of this paper is to analyse the impact of spin-off announcements on the parent firm’s share prices. Also, it is studied that during which period the announcement impacts the share prices significantly thereby affecting the shareholder wealth.


A sample of 76 Indian firms has been taken which announced the spin-off of their one or more divisions during 2010–2011 to 2015–2016. The authors have used the event study methodology with an event window period of −35 to +35. Estimation window of 256 (−290, −35) days is considered in the study. S&P BSE 500 is used as a market index.


The authors found that spin-offs have a significantly positive influence on the share prices of the parent firm. The authors also found that average abnormal return (AAR) of all the 76 companies taken together have been highest on day 0 and the cumulative AAR is highest for day +1. These results are in consonance with what had been concluded by Hite and Owers (1983), Cusatis et al. (1993), Miles and Rosenfeld (1983) and Rosenfeld (1984). All these studies are based on the data derived from the USA. Outcome of this study substantiates the same results when Indian spin-offs are analysed.


This paper provides the first comprehensive analysis of the impact of Indian spin-offs on the shareholder’s wealth.



Aggarwal, P. and Garg, S. (2019), "Restructuring through spin-off: impact on shareholder wealth", Managerial Finance, Vol. ahead-of-print No. ahead-of-print.

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