Corporate success from shareholder point of view lies in the rise in return of the investment and they enjoy high expected return. Managers and investors have experimented with different strategies for maximizing the value of the business in addition to meeting the shareholders demand to maximise the value of their assets. In this project I’ll be discuss a popular trend that is the case of corporate spinoffs. The common definition of spinoff is when a section of an organization turns into an independent business. The “spinoff” company takes assets, intellectual property, technology, and/or existing products from the parent organization.
In this project report you can learn about variables which result in corporate spinoffs along with the short and medium term risk and return which corporate spinoffs yield. I have observed Seventeen pre-spinoff businesses which turned into Thirty four post-spinoff businesses that kept trading on the stock exchange. Just for the study I use time-series regression, and my model is the single factor market model. I will use this model to calculate the beta and the firm specific factors. Helping theories are: efficiency, portfolio theory, valuation method and asymmetry as all these topics are essential parts in a corporate spinoffs….
Watch a video on Why Spin-off Companies Grow
Contents
1 INTRODUCTION
1.1 BACKGROUND
1.1.1 Historical background
1.2 THE SITUATION DURING THE STUDY
1.3 PROBLEM AND PURPOSE
1.4 PREVIOUS RESEARCH
1.5 OUTLINE OF THE STUDY
1.6 LIMITATIONS
2 THEORETICAL FRAMEWORK
2.1 COST AND EFFICIENCY
2.2 PORTFOLIO THEORY
2.3 CAPITAL ASSET PRICING MODEL (CAPM)
2.3.1 Assumptions
2.3.2 The process
2.3.3 CAPM and the single-factor market model
2.3.4 Beta implication
2.4 ASYMMETRIC INFORMATION
3 METHODOLOGY
3.1 THE REGRESSION MODEL
3.1.1 Forecasting with the single-factor market model
3.2 DATA COLLECTION
3.2.1 Risk free rate presentation
3.2.2 Market rate of return
3.3 VALIDITY
4 EMPIRICAL RESULTS
4.1 PRE-SPINOFF
4.2 POST-SPINOFF
4.3 RELATIVE RETURN COMPARISON, POST-SPINOFF
4.4 UNCOVER THE RISK AND RETURN RELATION, POST-SPINOFF
4.5 CONGLOMERATE VS. SEPARATE UNITS
4.6 GROUP COMPARISON
5 ANALYSES OF CORPORATE SPINOFFS
5.1 TRIGGERS
5.2 EACH SPINOFF CASE’S RISK AND RETURN
5.3 AVERAGE GROUP’S RISK AND RETURN
5.4 POSSIBLE GAINS
5.5 CONFLICTS….
Source: Jönköping University
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