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International Business in the Context of Emerging Markets Read chapter Read first chapter

2017 | OriginalPaper | Chapter

6. Do Spin-Offs Really Create Value? Evidence from India

Author : Venkatesh Kambla

Published in: International Business Strategy

Publisher: Palgrave Macmillan UK

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Abstract

There is a common perspective in the academic and popular literature that spin-offs tend to create value for shareholders (e.g., Cusatis, Miles, & Woolridge, 1993; Desai & Jain, 1999; Sin & Ariff, 2006; Sudarsanam & Qian, 2007; Veld & Veld-Merkoulova, 2009; Khedekar, 2013). This view is based on evidence from a number of studies using data from the USA and indicating that, on average, the announcement of a spin-off is associated with positive abnormal stock returns. Moreover, based on evidence from studies done on US firms (e.g., Cusatis et al., 1993; Desai & Jain, 1999; McConnell, Ozbilgin, & Wahal, 2001) shares of firms completing spin-offs appear to exhibit excess returns over periods of up to three years following the restructure. However, studies using European data have not indicated the presence of significant abnormal stock returns following spin-offs.

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Footnotes
1
The “license raj” is a term used to describe the regulation of the private sector in India between 1947 and the early 1990s. In India, at that time, one needed the approval of numerous agencies in order to legally set up a business. Manufacturing, in particular, was heavily regulated. The licence raj was the result of a mixed economy that used a government planning commission established after India’s independence. It was largely successful in the 1950s and after, but eventually led to low rates of growth and investment. India began to liberalize its economy in the 1980s, ending the licence raj (Farlex Financial Dictionary, 2012).
 
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Metadata
Title
Do Spin-Offs Really Create Value? Evidence from India
Author
Venkatesh Kambla
Copyright Year
2017
Book
International Business Strategy

Print ISBN: 978-1-137-54466-7

Electronic ISBN: 978-1-137-54468-1

Copyright Year: 2017

DOI
https://doi.org/10.1057/978-1-137-54468-1_6