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The Spinoff and Merger Ex-Date Effects

Anand M. Vijh
The Journal of Finance
Vol. 49, No. 2 (Jun., 1994), pp. 581-609
Published by: Wiley for the American Finance Association
DOI: 10.2307/2329164
Stable URL: http://www.jstor.org/stable/2329164
Page Count: 29
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The Spinoff and Merger Ex-Date Effects
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Abstract

This article shows that some of the wealth gains from financial decisions involving changes in security form occur on predictable ex dates. For a sample of 113 spinoffs during 1964 to 90, we document an average excess return of 3.0 percent on ex dates, roughly the same magnitude as the average announcement-date return. We conjecture that the spinoff ex-date return arises because the parent and subsidiary stocks attract different investors who prefer to buy the separated shares after the ex date. We also document that, on average, the target shareholders in stock-for-stock mergers earn an excess return of 1.5 percent on merger ex dates.

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