Can spin-offs enhance corporate market value?

Zhe Liu, Xin Liu, Kefan Lan, Haijun Wang and Qihui Li

Research in International Business and Finance, 2025, vol. 77, issue PB

Abstract: This study examines the long-term impact of domestic spin-offs on corporate market value and their underlying mechanisms using data from China's capital market between 2017 and 2023. First, employing the difference-in-differences (DID) model, we find that spin-offs significantly enhance parent companies' market value by an average of 16.06 billion yuan, with lasting effects. Second, mechanism analysis reveals that spin-offs achieve this impact by alleviating financing constraints, improving operational performance, reducing related-party transactions, and optimizing management tone. Third, heterogeneity tests show that state-owned enterprises, firms with high equity concentration, strong management incentives, larger firms, and those with specialized operations benefit more from spin-offs. Fourth, companies splitting subsidiaries for listing on the STAR Market or ChiNext Board achieve greater market value; even unlisted subsidiaries still provide benefits from the spin-off. During the COVID-19 pandemic, firms in disadvantaged industries benefit more long-term value from spin-offs, suggesting a counter-cyclical effect. This study offers empirical and theoretical support for businesses restructuring to manage corporate market value.

Keywords: Spin-offs; Corporate market value; Financing constraints; Related-party transactions; Management tone (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:77:y:2025:i:pb:s0275531925002028

DOI: 10.1016/j.ribaf.2025.102946

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