Analysis of spin-off long-term performance and effects of dual directorship

Abstract: This paper analyses the post spin-off stock performance of 198 European companies from 15 different countries. We calculate monthly abnormal returns over 36 months following the completion of spin-offs over the sample period from 2002 to 2014. We also analyze whether there is a significant effect on the abnormal returns when spin-off parent and target company continue to share board and management members after the completion of spin-off (dual directorship). We find that both spin-off parent and target companies continue to generate long-term abnormal returns after the spin-off while target companies tend to outperform parent companies. We also find that having continued dual directors has a positive effect on the performance of parent companies while the effect on the performance of target companies cannot be determined.