Does Spin-off Affect Corporate Financial Performance?

Abstract

Corporate rebuilding has gained popularity in the current era as more number of corporates are adopting various methods of corporate restructuring. This research focuses on the effect of spin-off on the financial health of the demerged entities from the perspective of long-term solvency and profitability. Ten sample demerged companies have been taken into consideration over a period ranging from 2011-12 to 2018-19. Sample paired t-test has been applied to analyse the effect of spin-off on financial performance of the demerged entities both short-term and long-term basis. Results suggest that spin-off may not be an appropriate strategic decision in the long-run, but in the short-run it may be an effective decision