The Impact of Corporate Spin-Offs on Share Price Movement Empirical Evidence from India

Abstract

The present study focuses on the effect of spin-off announcement on the stock returns of 24 sample demerged companies in India for the period from 2018-19. For this purpose, the market model of event study methodology had been applied. The impact of the spin-off is statistically significant on cumulative average abnormal returns of these sample firms for time window(-2,+2) and(-10, +10) which are 5088 per cent and 6609 per cent, respectively, at a 5 per cent level of significance. This study supports the statement that changes in stock returns are strongly associated with spin-off announcements.