Graduation Year

2026

Date of Submission

12-2025

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Nishant Dass

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2025 Ryder D Jones

Abstract

This study examines the determinants and short-run consequences of corporate spin-offs among U.S. public firms from 1990 to 2025. Using a sample of 169 parent events and a predictive panel of firm-year observations, the analysis evaluates whether financial constraints, asset structure, and strategic fit are associated with the decision to separate a division. The results show that firms with lower cash balances, weaker operating cash flow, and less tangible asset bases are more likely to pursue a spin-off, consistent with theories that link separation to strained internal capital markets and poor strategic alignment.

To assess outcomes, short-run parent performance is measured using buy-and-hold abnormal returns (BHARs) over a sixty-three trading day window. Parents match the market on average, although returns vary widely across firms. Balance sheet strength and industry context explain part of this variation, with more heavily leveraged parents experiencing weaker short-run performance. Event-time return patterns show modest movement leading into completion and little systemic drift afterward.

Overall, the evidence suggests that spin-offs are chosen when they help resolve meaningful financial or organizational frictions, and that their immediate valuation effects depend on the parent’s underlying conditions and the clarity of the resulting structure.

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