Graduation Year

2020

Date of Submission

5-2020

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Ben Gillen

Abstract

Spinoffs are special events where one public company separates an operating division into a new public company, using shares in the new company to compensate their shareholders. I explore the use of accounting ratios that measure both public and spinoff firms, to see if they explain returns in the spinoff company. Six ratios are calculated using accounting data from the quarter before and after a spinoff, then used to build ranked portfolios. The average returns of each portfolio are compared to analyze which ratio value ranges correlate to the highest average spinoff returns. Additionally, twelve regressions are built to analyze the predictive capabilities of accounting ratios while controlling for market value and industry. I find that, in this sample of spinoffs from 2009-2017, parent firm current ratio and spinoff firm no credit interval ratio are significantly correlated to spinoff returns at the 10% confidence level.

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This thesis is restricted to the Claremont Colleges current faculty, students, and staff.

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