Evidence of Wealth Effect of Corporate Spin-Offs in China
Keywords:
corporate spin-offs’ wealth effects; state capital economy; matched control samples; precision weighted cumulative average abnormal return
Abstract
Is corporate spin-offs less attended as a wealth-generating asset restructuring in the People's Republic of China (China)?. Was the wealth effect of China's corporate spin-off occurring in the State Capital Economy? Although China's Initial Public Offering (IPO) incidences and volumes are vigorous, China's corporate spin-offs started late and lack extensive applications. In July 2020 alone, a total of seventy-five companies completed IPO in mainland China and abroad despite the outbreak of the COVID-19 pandemic. This paper aimed to provide evidence on the wealth effect of the combination of China corporate spin-off announcements, parent and subsidiary. We took twenty-four Chinese listed companies that have been successfully spin-off as a whole to explore the corporate spin-off wealth effect on their market value, and the empirical results of positive returns were convincing. Compared with the prior corporate spin-off researches in China, this paper is more comprehensive as we examined the shareholders' wealth effect of the corporate spin-off announcements from the years 2000 to 2018 in the Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE).
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2021-06-11
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