## Introduction

There is a very high level of corporate restructuring globally. Changes in the control of corporate assets include both mergers and acquisitions (M&A) and divestitures. M&A activity attracts a great deal of attention in the financial press, noting, for example, that the total value of such activity in the USA in 2018 was $3.88 trillion, exceeded only by the total in 2015 of$4.77 trillion.

### Summary of empirical findings

Our empirical analysis found that the stellar value-creating spin-off attributes first calibrated by Owers (1982) now 4 decades ago have been maintained into the recent past as the volume of such restructuring has increased dramatically. The initial announcement effect and attractive ex-dividend abnormal returns are still present. The formal declaration of a spin-off dividend resolves any residual uncertainty about the divestiture being completed and is associated with another significant CAR.

It is well-documented that spin-offs are associated with statistically significant abnormal returns. However, despite the reference to the implicit “economic materiality” of the associated equity/stock price changes, there has been little measurement of the impact in terms of monetary amounts. This paper calibrated the monetary/dollar value creation and documents the remarkable economic materiality of value creation by spin-offs.

## Conclusions

This paper spans and reviews the whole interval from the first foundational published spin-off research papers from 1983 until 2021. In the sample selection section, we noted that the rate of spin-offs has increased relative to earlier times. While used in practice over many decades, it is only in the past 40 years that there has been systematic theoretical and empirical research into the motivations for and valuation consequences of voluntary spin-offs. These research findings of just how substantial the valuation consequences of spin-offs are may well have prompted the broader use of this restructuring strategy in practice. As in previous studies, we confirm and calibrate value changes associated with spin-offs to be statistically significant, but this paper’s additional contribution measures monetary changes in market capitalizations that are economically material.

The combination of strengthening sophistication in investor portfolio composition might have prompted more firms to separate distinct and potentially incompatible operating strategic business units (SBUs) through spin-off divestitures. As portfolio theory and practice have developed along with research into large firms’ financial performance, there has emerged a profile of under-performance by large, diversified firms. A classic example is General Electric, Inc. Once hailed as “the last of the successful conglomerates,” it is by now held in very low regard for both dysfunctional operating attributes and the accompanying poor financial and investment performance. It is much preferred “pure-play” firms that focus on one (or a few closely related) lines of business and let investors accomplished the desired diversification by holding diversified financial portfolios of primarily “pure-play” firms.

Our empirical analysis finds that the spin-off’s stellar value-creating attributes have been maintained into the recent past as the volume of such restructuring has ballooned. The positive initial announcement effect and compelling and interesting ex-dividend abnormal returns are still present. The formal declaration of a spin-off dividend resolves any residual uncertainty about the divestiture being completed and is associated with another significant CAR. Empirical research calibrates the overall CAR over the entire interval from the initial press date to dividend distribution for our sample. It is well-documented that spin-offs are associated with statistically significant abnormal returns. Despite the reference to the implicit “economic materiality” of the associated equity/stock price changes, there has previously been a little measurement of the impact in terms of monetary amounts. The almost \$100 billion monetary/dollar calibration of the unique economic materiality of value created by spin-offs is a substantial incremental contribution of this paper.