Long-run performance of corporate restructurings : evidence from the JSE

Abstract

This research has investigated the long-run performance of corporate restructurings through unbundling transactions on the JSE between 2000 and 2012. The corporate unbundling transactions considered by the research are spin-offs and sell-offs. From the two unbundling transactions, four samples were derived, that is, 21 spin-offs, 14 parent-spin-offs, 14 sell-offs and 20 parent-sell-offs. The share price performance of these samples was investigated by a matching firm methodology under the buy and hold abnormal returns. The research found that positive abnormal returns are present for both samples for up to four years after unbundling. Secondly, with the exception of parent-sell-offs, significant abnormal returns were experienced by both samples for up to four years after unbundling. It was also found that a spin-off is a preferable corporate unbundling strategy to a sell-off over a long-run period. This research implies that companies with heavy structures should unbundle in order to unlock shareholders’ value.