Spinoffs in the Nordics : An Empirical Study of Value Creation in the Nordic Countries

Abstract

This thesis investigates the long-term value creation of Nordic spinoffs from 1990 to 2022. First, we perform a long-run event study of spinoffs, parent firms, and proforma firms to conduct whether these firms create value in the long run. Moreover, we study the value creation factor focus to determine whether the value creation happens because of increased corporate focus. Additionally, we study the operating performance using a difference-in-differences model. In both models, we have compared spinoffs, parent firms, and proforma firms to matching firms using a propensity score matching model. In our analysis, we find statistically significant evidence that spinoffs outperform the matching portfolio by 30% over a three-year event window. Parent firms outperform the matching portfolio by 8%. However, it is not significant at conventional levels. Moreover, we find evidence that focus-increasing firms outperform non-focus-increasing firms over a three-year window, indicating that some of the value creation is due to increased corporate focus. Furthermore, our difference-in-difference (DiD) models indicate that the operating performance for spinoffs, parent firms, and proforma firms is better than their corresponding matching portfolios over the same three-year event window. We find statistically significant results for all performance metrics in the DiD model for the DiD-estimator, except for the first and second year of ROA and the third year of current ratio. Moreover, for the parent firms, we find no statistically significant results. For the proforma firms, we only find statistically significant results for return on assets and leverage in the first year. However, for spinoffs, the DiD results indicate reciprocal results between the event study models and the DiD models, meaning we can interpret the results economically. To sum up, our findings indicate that spinoffs create shareholder value in the long term, while the results for parent and proforma firms are more ambiguous.