CAN TAKEOVER LOSSES EXPLAIN SPIN-OFF GAINS

This paper evaluates the conjecture that excess stock returns that hav e been documented around the announcement of corporate spin-offs repre sent, at least in part, the re-creation of value destroyed at the time of an earlier acquisition. We evaluate this question with a sample of spin-offs that originated as earlier acquisitions. At the time of the original acquisition, on average, announcement period returns to the bidder and the combined bidder and target firm are negative and signif icant. Additionally, announcement period returns at the time of the sp in-off are negatively and significantly correlated with acquisition an nouncement period returns.