Dyssynergy Effect of Voluntary Spinoffs and Market Efficiency

The exccss returns associated with spinoff announcements between 1980 and 1988 are investigated. It is found that spinoff announcements continued to create excess returns reaching a maximum of 2.88%, with a Z statistic of 8.22, between the period of one day before the announcement and the announcement date. A logit model is formed to investigate the relation between spinoff decision of companies and their asset growth rates. The results show that asset growth rate is a significant determinant of spinoff decision with a p value of 0.075.