Proceedings of The 6th International Conference on Management, Economics and Finance
Impact of Spin-Off Restructuring Strategy on Performance of Parent Company: Evidence from India
While the impact of divestitures on the stock return of parent companies has been extensively studied, little attention has been given to the financial performance of the divesting firms. Previous research has found that demergers were associated with significant positive cumulative abnormal returns for the parent company. However, these studies have not identified whether the parent company perform better after spin-off. The purpose of this paper is to investigate the impact of spin-off restructuring strategy on the financial performance of the parent company. Specifically, this study examined the performance of a sample of twenty-two spin-offs in India across a five-year period. Four accounting and financial market measures were tracked from three years prior to divestiture and three years post divestiture. The result of this research has shown that spin-off corporate restructuring strategy does not improve short-term performance of the parent company.
keywords: Demerger, Spin-off, Divestiture, Restructuring, Financial Performance