Sustainability Perspectives of Market-Pulled and Crisis-Pushed Corporate Spin-Offs
Abstract
Are there different wealth effects for Corporate Spin-offs (CSOs) during economic crisis viz non-crisis and do their performance matter? The answer is crucial for market players investment decisions and CSOs research underpinning impact on sustainability. Reviewing predominantly three papers on Malaysian CSOs, inter-alia, other papers globally, there was an explanation gap on the magnitude, speed, significance, and sustainability of CSO wealth in terms of financial market conditions at the timing of CSOs and CSOs’ performance. After remedying event-induced volatility and cross-sectional correlations, wealth effects were analysed using ninety Malaysian CSOs from 1987 to 2019. We found Crisis-pushed CSOs during weak market conditions had dwindling short-term gains implying weak sustainability contrary to Market-pulled CSOs that demonstrated strong sustainable long-term gains. Pushed CSOs achieved adversely -0.81%, and, Positive performance CSOs have earning potential 14.12% compared to Negative performance CSOs with losing potential -16.08%. CSOs' determinants changed when subjected to market-based criteria and performance-based criteria suggested CSOs' wealth effect oblivious to market conditions and performance were not reliable for gauging CSO expectations. Performance-based criteria subsampling revealed that the composition of generalized CSOs return is not positively dominant and have equal potential to gain and risk of loss.
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