scholarly journals The ongoing contributions of spin-off research and practice to understanding corporate restructuring and wealth creation: $100 billion in 1 decade

2021 ◽  
Vol 8 (1) ◽  
Author(s):  
James E. Owers ◽  
Bruno S. Sergi
Keyword(s):  
Value Creation ◽  
Statistical Significance ◽  
Abnormal Returns ◽  
Price Impact ◽  
Wealth Creation ◽  
Research Papers ◽  
Public Companies ◽  
Monetary Value ◽  
Order Of Magnitude ◽  
Equity Price

AbstractSince the 1980s, analysis of spin-offs has become a key line of inquiry in corporate finance. This paper reviews the theory and empirical research papers about spin-off restructuring and measures the monetary value created by spin-offs. First, we document the valuation impact of spin-offs for the divesting firms and then examine such subtleties as the interesting (positive) ex-dividend day price impact and the myriad other details associated with these transactions. This study provides a review of the now extensive research into spin-off divestitures. It looks into equity price reactions around the announcements of 249 voluntary spin-offs undertaken by US public companies over the interval 2007–2017. The abnormal returns associated with recent spin-off divestitures are of the same order of magnitude as those from the earlier papers, showing the sustained statistical significance and new economic materiality measures. With more firms undertaking spin-offs and the positive abnormal returns continuing to be substantial, the clear implication is that the overall monetary value creation resulting from spin-offs has increased markedly. Finally, and in a first for spin-off research, this paper calibrates the monetary value created by spin-offs despite the voluminous research of the topic. It establishes that spin-offs create large monetary value increments for divesting a firm’s stockholders—almost $100 billion in the interval 2007–2017.

Testing Market Reaction On Stock Market Delisting In Russia

2021 ◽  
Vol 15 (3) ◽  
pp. 14-27
Author(s):  
Елена Моисеевна Рогова ◽  
Maria Belousova
Keyword(s):  
Stock Market ◽  
Stock Prices ◽  
Statistical Significance ◽  
Abnormal Returns ◽  
Global Market ◽  
Public Companies ◽  
Market Participants ◽  
Study Methodology ◽  
Available Information ◽  
The Impact

This paper expands the available information on the effects of delisting in Russia, and represents a rare empirical analysis of the impact of external events on securities prices in this major global market. We seek to evaluate how stock prices of competing companies fluctuate around the dates of stock market delisting announcements and completion. We analyse stock prices as correlated with company delisting events from 2004 to 2019 on 552 companies on the Russian MOEX Exchange. The event study methodology is used to evaluate the abnormal returns of rival companies close to relevant delisting dates. These data were checked for statistical significance using the standardised Patell residual test. The results indicate a significant competitive effect on stock prices both on the dates of delisting announcement and on completion, with more significant returns close to announcement dates. These effects were found to influence the prospects not just of individual groups of companies, but of all market participants. We may conclude from our results that delisting is not an event limited in effect to only one company, but impacts the industry as a whole, temporarily changing its value. As such, it will interest both shareholders and managers of public companies, and any participants of industries in which delisting occurs.

Financial institutions mergers: a strategy choice of wealth maximisation and economic value

2020 ◽  
Vol 12 (4) ◽  
pp. 495-529
Author(s):  
Mohamad Hassan ◽  
Evangelos Giouvris
Keyword(s):  
Credit Risk ◽  
Event Study ◽  
Financial Institutions ◽  
Value Creation ◽  
Economic Value ◽  
Abnormal Returns ◽  
Study Analysis ◽  
Event Window ◽  
Content Type ◽  
Merger Announcement

Purpose This study Investigates Shareholders' value adjustment in response to financial institutions (FIs) merger announcements in the immediate event window and in the extended event window. This study also investigates accounting measures performance, comparison of post-merger to pre-merger, including several cash flow measures and not just profitability measures, as the empirical literature review suggests. Finally, the authors examine FIs mergers orientations of diversification and focus create more value for shareholders (in the immediate announcement window and several months afterward) and/or generates better cash flows, profitability and less credit risk. Design/methodology/approach This study examines FIs merger effect on bidders’ shareholder’s value and on their observed performance. This examination deploys three techniques simultaneously: a) an event study analysis, to estimate and calculate abnormal returns (ARs) and cumulative abnormal returns (CARs) in the narrow windows of the merger announcement, b) buy and hold event study analysis, to estimate ARs in the wider window of the event, +50 to +230 days after the merger announcement and c) an observed performance analysis, of financial and capital efficiency measures before and after the merger announcement; return on equity, liquidity, cost to income ratio, capital to total assets ratio, net loans to total loans, credit risk, loans to deposits ratio, other expenses and total assets, economic value addition, weighted average cost of capital and return on invested capital. Deal criteria of value, mega-deals, strategic orientation (as in Ansoff (1980) growth strategies), acquiring bank size and payment method are set as individually as control variables. Findings Results show that FIs mergers destroy share value for the bidding firms pursuing a market penetration strategy. Market development and product development strategies enable shareholders’ value creation in short and long horizons. Diversification strategies do not influence bidding shareholders’ value. Local bank to bank mergers create shareholders’ value and enhance liquidity and economic value in the short run. Bank to bank cross border mergers create value for bidders’ in the long term but are associated with high costs and higher risks. Originality/value A significant advancement over the current literature is in assessing mergers, not only for bank bidders but also for the three pillars FIs of the financial sector; banks, real-estate companies and investment companies mergers. It is an improvement over current finance literature because it deploys two different strategies in the analysis. At a univariate level, shareholder value creation and market reaction to merger announcements are examined over short (−5 or +5 days) and long (+230 days) windows of the event. Followed by regressing, the resultant CARs and BHARs over financial performance variables at the multivariate level.

Impact of ETF Listing on the Returns Generated by Underlying Stocks: Indian Evidence

2021 ◽  
pp. 0258042X2199101
Author(s):  
Prabhdeep Kaur ◽  
Jaspal Singh
Keyword(s):  
Event Study ◽  
Abnormal Returns ◽  
Price Impact ◽  
Exchange Traded Funds ◽  
Study Analysis ◽  
Jel Codes ◽  
Securities Transaction Tax ◽  
Underlying Stocks ◽  
Transaction Tax ◽  
The Impact

The advent of exchange traded funds (ETFs) has rendered index trading much affordable compared to their futures counterparts. The present study attempts to examine the impact of ETF listing on the price of the constituent securities of the index that it aims to track. The sample comprises of all the equity ETFs listed in India from 1 January 2002 to 31 March 2019. Event study analysis has been used to examine whether listing of ETFs bore any price impact on the constituent stocks of ETFs. To account for robustness, both parametric and non-parametric tests have been employed. The estimates obtained from event study analysis revealed that the constituent stocks generated insignificant returns for the period extending from January 2002 to March 2009 and April 2009 to March 2013 but positive and significant cumulative average abnormal returns (CAARs) post ETF listing for the period ranging from April 2013 to March 2019, thus providing evidence in support of positive price impact. The permission granted to pension funds, insurers and Employees’ Provident Fund Organisation (EPFO) to invest their funds in ETFs as well as reduction in Securities Transaction Tax (STT) account for the observed price differential. An analysis of the factors accounting for the variation in valuation effects ascertained that the stocks that were traded thinly prior to ETF listing and those forming part of ETFs with larger asset base experienced positive price impact following ETF listing. JEL Codes: G11, G14

Anonymized Firm Data under Test: Evidence from a Replication Study

2005 ◽  
Vol 225 (5) ◽  
Author(s):  
Joachim Wagner
Keyword(s):  
Cross Sections ◽  
Statistical Significance ◽  
Original Data ◽  
Replication Study ◽  
Firm Level ◽  
Level Data ◽  
Practical Usefulness ◽  
Order Of Magnitude ◽  
Anonymized Data ◽  
Firm Data

SummaryThis paper contributes to the literature on the use of anonymized firm level data by reporting results from a replication study. To test for the practical usefulness of anonymized data I selected two of my published papers based on different cross sections of firm data. The data used there were anonymized by micro aggregation. I replicated the analyses reported in the papers with the anonymized data, and then compared the results to those produced with the original data. Frequently, the reported levels of statistical significance differ. Furthermore, statistically significant coefficients sometimes differ by order of magnitude. Therefore, at least for the moderate sample sizes used here micro-aggregated firm data should not be considered as a tool for empirical research.

Determinants of stock market reaction to cross-border acquisitions: evidence from emerging economies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Samta Jain ◽  
Smita Kashiramka ◽  
P. K. Jain
Keyword(s):  
Emerging Economies ◽  
Value Creation ◽  
Global Economy ◽  
Emerging Market ◽  
Research Work ◽  
Abnormal Returns ◽  
Content Type ◽  
Cross Border ◽  
Country Level ◽  
Acquiring Firms

PurposeThe global economy has witnessed an exponential increase in cross-border acquisitions (CBAs) by emerging market companies (EMCs), demanding a relook at their internationalization strategy. The purpose of the study is to investigate whether the announcement of CBAs by EMCs creates value for the equity-holders of acquiring firms and identify factors affecting the valuation of acquiring companies.Design/methodology/approachThe paper investigates the announcement impact of CBAs of CNX Nifty 500 Indian and SSE 380 Chinese companies. The event study analysis of 553 Indian and 125 Chinese acquisitions supports the contention that CBAs are indeed a strategic choice of EMCs for value creation.FindingsCBAs generate positive and statistically significant abnormal returns for shareholders of both Indian and Chinese acquirers. The markets, however, differ in terms of their motivations; country-level factors have been observed to exert significant influence on the returns of Indian acquirers. Indian companies experience larger value creation on acquiring firms established in developed, institutionally closer and/or economically distant markets. The findings support the asset-seeking motive of Indian companies.Originality/valueThe research work contributes to the evolving stream of CBAs literature with a focus on the globalization strategies of EMCs. The present study is a modest attempt to lay the foundation for a new theoretical framework (asset-seeking perspective) of overseas acquisitions from emerging economies. The existing studies on emerging economies have emphasized, in isolation, either Indian CBAs or international acquisitions by Chinese firms. Being so, the study is unique and original in the sense that it is a comparative study of India and China.

Acquisitions of non-controlling equity stakes: Agency conflicts and profitability

2020 ◽  
pp. 147612702092667
Author(s):  
Michele Pinelli ◽  
Francesco Cappa ◽  
Enzo Peruffo ◽  
Raffaele Oriani
Keyword(s):  
Value Creation ◽  
Abnormal Returns ◽  
Past Research ◽  
Agency Conflicts ◽  
Target Firm ◽  
Controlling Shareholder ◽  
Shareholder Protection ◽  
Cumulative Abnormal Returns ◽  
Minority Shareholder Protection ◽  
Negative Effect

While past research on minority acquisitions has ignored how agency conflicts could prevent acquirers from realizing value creation opportunities, this study investigates whether principal–agent and principal–principal conflicts with the target’s managers and controlling shareholder hinder acquirers’ ability to capture value from acquisitions of non-controlling equity stakes. Using archival data from a global sample of 443 minority acquisitions announced between 2011 and 2019, we found that cumulative abnormal returns are positively associated to minority shareholder protection and negatively associated to the presence of a strong controlling shareholder in the target firm. We also found that acquisitions of small non-controlling equity stakes amplify the negative effect of the strong controlling shareholder, which instead weakens if acquirers purchase large non-controlling equity stakes. This study contributes to the development of our understanding of the conditions that expose acquirers to value losses from minority acquisitions by examining the intricate bundle of agency conflicts with the target’s managers and controlling shareholder. In so doing, this study also provides useful insights to business practice.

Does Warsaw Stock Exchange value corporate social responsibility?

2016 ◽  
Vol 12 (3) ◽  
pp. 611-622 ◽  
Author(s):  
Jacek Lipiec
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Future Research ◽  
Public Companies ◽  
Content Type ◽  
Exchange Value ◽  
Warsaw Stock Exchange ◽  
Corporate Social

Purpose This paper aims to examine the performance of corporate social responsibility (CSR) portfolio at the Warsaw Stock Exchange. Design/methodology/approach This paper uses the CSR portfolio of public companies that was selected in a three-step procedure. In total, 23 companies were selected and formed a CSR portfolio that is traded on the Warsaw Stock Exchange under the Respect Index. The Capital Asset Pricing Model (CAPM) is used to compare returns of CSR companies with respect to the market. The performance of this portfolio is measured in the period from 2010 to 2012. Findings This paper finds that the CSR portfolio measured under the Respect Index outperformed market in all time periods from 2010 to 2012. In addition, in 2010, the CSR portfolio exceptionally outperformed the market by almost 80 per cent. In 2011, even though the market was down, the CSR portfolio reported lesser losses: −0.93 vs −1.73 per cent. In the following year, the market regained and the CSR portfolio again outperformed the market by 14 per cent. This paper also finds that the CSR portfolio is more sensitive to systematic risk than to specific risk. In addition, the CSR securities move according to the market trend. Research limitations/implications The limitation of this paper is attributed to a cause-and-effect relationship. In other words, it did not answer whether adopting CSR led to higher profitability or profitability reflected an awareness of market conditions that favored the adoption of CSR. The future research should focus on this issue and indicate whether investors prioritize CSR over profits or vice versa. Practical implications The results indicate that investments in CSR portfolio companies bring abnormal returns to investors. In addition, the CSR portfolio may resist market downturns and even bring exceptional profits to investors. Originality/value This study explains the CSR portfolio’s performance on the Warsaw Stock Exchange by using the CAPM.

An Examination of Corporate Tax Shelter Participants

2009 ◽  
Vol 84 (3) ◽  
pp. 969-999 ◽  
Author(s):  
Ryan J. Wilson
Keyword(s):  
Financial Reporting ◽  
Abnormal Returns ◽  
Wealth Creation ◽  
Corporate Tax ◽  
Managerial Opportunism ◽  
Reporting Practices ◽  
Tax Shelter ◽  
Ex Post ◽  
Tax Shelters ◽  
Aggressive Financial Reporting

ABSTRACT: Recent evidence suggests that corporate tax shelters have become important corporate instruments for reducing tax burden. Based on a sample of identified tax shelter participants, I develop a profile of the type of firm that likely engages in tax sheltering. The model detects tax shelter participants through the use of variables predicted to be either affected by or associated with tax sheltering. I find that firms actively engaged in tax sheltering exhibit larger ex post book-tax differences and more aggressive financial reporting practices. Using this model of tax shelter firm characteristics, I identify a broad sample of predicted tax shelter firms from the population of firms. I then examine whether tax sheltering is associated with wealth creation for shareholders or with managerial opportunism. I find that active tax shelter firms with strong corporate governance exhibit positive abnormal returns. This finding is consistent with tax sheltering being a tool for wealth creation in well-governed firms.

Video-recorded Retail Cannabis Trades in a Low-risk Marketplace

2017 ◽  
Vol 55 (1) ◽  
pp. 103-124 ◽  
Author(s):  
Kim Moeller
Keyword(s):  
Statistical Significance ◽  
Temporal Patterns ◽  
Extreme Weather ◽  
Time Of Day ◽  
Low Risk ◽  
Easy Access ◽  
Video Footage ◽  
Monetary Value ◽  
Discretionary Time ◽  
Legal Risks

Objectives: This study examines the monetary value of cannabis retail trades and temporal patterns in an open-air market with low legal risks. Method: Video footage detail activities of four sellers and transcriptions were provided by the Copenhagen police. Standard bivariate tests of statistical significance are used to examine the influence of time of day and discretionary activities on trade value and temporal patterns. Results: The average trade was valued at DKK 159 (∼US$24) and DKK 121 when excluding 16 outliers. Both the rate and monetary value of trades increase as the day progresses. Twice as many trades are made hourly after sunset and significantly more in relation to national holidays and on days before days with extreme weather. Conclusion: Under the conditions of low legal risks and easy access to supply, cannabis trades are small and tend to increase in value over the course of a day. The temporal patterns in rates follow user availability of discretionary time.

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