Do Malaysian spin-offs create value?

Abstract

This paper investigates the short- and long-run share return performance of Malaysian spin-off firms during the period January 1980 to April 2011. Using daily and monthly data, the study examines the performance of spin-off firms against the benchmarks of Malaysian All-Shares indices. The results show that parent firms significantly outperformed the market during the few days surrounding the announcement date even after adjustment for size. In the long-run analysis of three years, however, and after allowing for size, this research failed to find abnormal performance for either parents or spun-off entities. Overall, the results of this research allow us to plausibly argue that the market anticipates both increased value for parent shareholders and potential exploitable stock market efficiency in the short-run period but not in the long-run.