Long-run performance of corporate spin-offs and sell-offs: Evidence from the JSE limited
Background: Prior to 1994, there were artificial restrictions on South African corporations as a result of isolation and sanctions. Thus, corporate unbundling activities in South Africa are still new relative to their overseas counterparts. Of recent, no study has vividly examined the long-run perfo...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
AOSIS
2020-12-01
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| Series: | South African Journal of Economic and Management Sciences |
| Subjects: | |
| Online Access: | https://sajems.org/index.php/sajems/article/view/3683 |
| _version_ | 1819296129220608000 |
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| author | Mitteran E. Nkongho Daniel Makina |
| author_facet | Mitteran E. Nkongho Daniel Makina |
| author_sort | Mitteran E. Nkongho |
| collection | DOAJ |
| description | Background: Prior to 1994, there were artificial restrictions on South African corporations as a result of isolation and sanctions. Thus, corporate unbundling activities in South Africa are still new relative to their overseas counterparts. Of recent, no study has vividly examined the long-run performance of spin-offs and sell-offs on the JSE Limited. In the most recent study on spin-offs and sell-offs, performance was investigated for less than 2 years. Long-run performance of spin-offs and sell-offs should be examined for at least 3 years in line with overseas literature. In order to fill the gap in previous literature, this study updates existing literature, and extends the investigation horizon to 4 years.
Aim: This study seeks to investigate the long-run performance of spin-offs and sell-offs on the JSE Limited.
Settings: This study matches the performance of an event firm to that of a non-event firm. The matching was done at sector and industrial level, using the value of equity as a matching measure. Performance was examined between 2000 and 2016, for up to 4 years.
Methods: The method of analysis is the matching firm technique under buy and hold abnormal returns. The creation of shareholder’s wealth was investigated for 26 spin-offs, 17 parent spin-offs, 16 sell-offs and 23 parent sell-offs.
Results: Abnormal returns are significantly positive for spin-offs, parent spin-offs and sell-offs for 1–4 years after unbundling. Only parent sell-offs failed to follow this path.
Conclusion: According to this study, spin-offs and sell-offs unlock shareholders’ wealth for up to 4 years on the JSE Limited. |
| first_indexed | 2024-12-24T04:53:12Z |
| format | Article |
| id | doaj.art-038dc6df64ed4c7da10249f1cdcefe8f |
| institution | Directory Open Access Journal |
| issn | 1015-8812 2222-3436 |
| language | English |
| last_indexed | 2024-12-24T04:53:12Z |
| publishDate | 2020-12-01 |
| publisher | AOSIS |
| record_format | Article |
| series | South African Journal of Economic and Management Sciences |
| spelling | doaj.art-038dc6df64ed4c7da10249f1cdcefe8f2022-12-21T17:14:28ZengAOSISSouth African Journal of Economic and Management Sciences1015-88122222-34362020-12-01231e1e1010.4102/sajems.v23i1.3683962Long-run performance of corporate spin-offs and sell-offs: Evidence from the JSE limitedMitteran E. Nkongho0Daniel Makina1Department of Finance, Risk Management and Banking, University of South Africa, PretoriaDepartment of Finance, Risk Management and Banking, University of South Africa, PretoriaBackground: Prior to 1994, there were artificial restrictions on South African corporations as a result of isolation and sanctions. Thus, corporate unbundling activities in South Africa are still new relative to their overseas counterparts. Of recent, no study has vividly examined the long-run performance of spin-offs and sell-offs on the JSE Limited. In the most recent study on spin-offs and sell-offs, performance was investigated for less than 2 years. Long-run performance of spin-offs and sell-offs should be examined for at least 3 years in line with overseas literature. In order to fill the gap in previous literature, this study updates existing literature, and extends the investigation horizon to 4 years. Aim: This study seeks to investigate the long-run performance of spin-offs and sell-offs on the JSE Limited. Settings: This study matches the performance of an event firm to that of a non-event firm. The matching was done at sector and industrial level, using the value of equity as a matching measure. Performance was examined between 2000 and 2016, for up to 4 years. Methods: The method of analysis is the matching firm technique under buy and hold abnormal returns. The creation of shareholder’s wealth was investigated for 26 spin-offs, 17 parent spin-offs, 16 sell-offs and 23 parent sell-offs. Results: Abnormal returns are significantly positive for spin-offs, parent spin-offs and sell-offs for 1–4 years after unbundling. Only parent sell-offs failed to follow this path. Conclusion: According to this study, spin-offs and sell-offs unlock shareholders’ wealth for up to 4 years on the JSE Limited.https://sajems.org/index.php/sajems/article/view/3683corporate unbundlingspin-offsparent spin-offssell-offsparent sell-offsmatching firmmarket value of equitymergers and acquisition. |
| spellingShingle | Mitteran E. Nkongho Daniel Makina Long-run performance of corporate spin-offs and sell-offs: Evidence from the JSE limited South African Journal of Economic and Management Sciences corporate unbundling spin-offs parent spin-offs sell-offs parent sell-offs matching firm market value of equity mergers and acquisition. |
| title | Long-run performance of corporate spin-offs and sell-offs: Evidence from the JSE limited |
| title_full | Long-run performance of corporate spin-offs and sell-offs: Evidence from the JSE limited |
| title_fullStr | Long-run performance of corporate spin-offs and sell-offs: Evidence from the JSE limited |
| title_full_unstemmed | Long-run performance of corporate spin-offs and sell-offs: Evidence from the JSE limited |
| title_short | Long-run performance of corporate spin-offs and sell-offs: Evidence from the JSE limited |
| title_sort | long run performance of corporate spin offs and sell offs evidence from the jse limited |
| topic | corporate unbundling spin-offs parent spin-offs sell-offs parent sell-offs matching firm market value of equity mergers and acquisition. |
| url | https://sajems.org/index.php/sajems/article/view/3683 |
| work_keys_str_mv | AT mitteranenkongho longrunperformanceofcorporatespinoffsandselloffsevidencefromthejselimited AT danielmakina longrunperformanceofcorporatespinoffsandselloffsevidencefromthejselimited |