This article analyzes excess returns generated by corporate spinoffs with respect to changes in investment policies of the spun-off companies. Following the spin-off, the best performing spun-off companies with low growth opportunities exhibit a significant reduction in investment and the best performing high-growth spun-off companies tend to increase or maintain the previous level of investment. The results provide evidence of the existence of a direct monotonic relationship between the size of the change in the level of investment, Tobin's Q, and excess returns based on the Fama and French (J. Financ. Econ. 33: 3-56, 1993) model.
Investment policies and excess returns in corporate spin-offs: evidence from the US market
ROVETTA, BARBARA
2006
Abstract
This article analyzes excess returns generated by corporate spinoffs with respect to changes in investment policies of the spun-off companies. Following the spin-off, the best performing spun-off companies with low growth opportunities exhibit a significant reduction in investment and the best performing high-growth spun-off companies tend to increase or maintain the previous level of investment. The results provide evidence of the existence of a direct monotonic relationship between the size of the change in the level of investment, Tobin's Q, and excess returns based on the Fama and French (J. Financ. Econ. 33: 3-56, 1993) model.File in questo prodotto:
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