Do Malaysian spin-offs create value?

Zakaria, N

Abstract

This thesis primarily investigates the short- and long-run share return performance of Malaysian
spin-off firms during the period January 1980 to April 2011. Using daily and monthly data, the
study examines the performance of spin-off firms against the benchmarks of Malaysian All-
Shares indices.
The results show that parent firms significantly outperformed the market during the few days
surrounding the announcement date even after adjustment for size. In the long-run analysis over
three years, however, and after allowing for size, this research failed to find abnormal
performance for either parents or spun-off entities.
Overall, the results of the research allow us to plausibly argue that the market anticipates both
increased value for parent shareholders and potential exploitable stock market inefficiency in
the short-run period but not in the long-run.
The present work fills another gap in the spin-off literature by discovering whether political
control of firms leads to poor performance for shareholders. The results indicate that parent
firms with strong informal ties with leading Malaysian politicians significantly outperformed
their counterparts in the non-politically linked group over the short-run period even after
eliminating the influence of size. However, holding political-control shares in a portfolio would
give a negative return effect to investors over the three-year holding periods.
This research also examines whether increased corporate focus in the event of a spin-off is
associated with the short- and long-run share return outperformance. By looking at the share
return performance of both focus-increasing and non focus-increasing parent firms, this study
provides evidence contradicting the claims of the corporate focus hypothesis. The results show
that focus-increasing parent firms significantly underperformed their counterparts in the non
focus-increasing group during the few days around the announcement date even after
comprehensive size adjustment. It can also be seen that spin-offs by focus-increasing entities
fail to demonstrate abnormal performance in the long-run period (three-years).

Citation

Zakaria, N. Do Malaysian spin-offs create value?. (Thesis). University of Salford

• Thesis Type: Thesis
• Deposit Date: Aug 5, 2021
• Award Date: Jun 1, 2012