Impact of Spin-Off Restructuring Strategy on Performance of Parent Company: Evidence from India

Proceedings of The 6th International Conference on Management, Economics and Finance

Year: 2023

DOI: https://www.doi.org/10.33422/6th.icmef.2023.03.003

[PDF]

Impact of Spin-Off Restructuring Strategy on Performance of Parent Company: Evidence from India

Neelam Rani

 

 

ABSTRACT: 

While the impact of divestitures on the stock return of parent companies has been extensively studied, adequate attention has not been drawn 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 performs better after the spin-off. This research work addresses whether the financial performance of the parent company improves after adopting the restructuring strategy through spin-off. The present study evaluated the performance of twenty spin-offs of Indian companies during a period of five years by using accounting and capital market indicators. The study reveals that corporate restructuring strategy does not improve the short-term performance of the divesting company.

keywords: Demerger, Spin-off, Divestiture, Restructuring, Financial Performance