Examining the performance effects of post spin-off links to parent firms: Should the apron strings be cut?

Matthew Semadeni, Albert A. Cannella

Research output: Contribution to journalArticle

46 Scopus citations

Abstract

Little research has examined the performance implications of the parent-child relationship post spin-off. Although the parent provided oversight of the child prior to the spin-off, effects of post spin-off links to the child remain unclear. Applying transaction cost and agency theories, our study of 142 firms spun-off between 1986 and 1997 examines how oversight and ownership by the parent firm influence stock market performance post spin-off. We find that while child firms benefit from some links to the parent, having too many links is negatively related to performance. The findings suggest that there is a balance between having too much parental involvement and not enough. Our study extends understanding of post spin-off child firm performance and provides valuable insights for both parent and child firms.

Original languageEnglish (US)
Pages (from-to)1083-1098
Number of pages16
JournalStrategic Management Journal
Volume32
Issue number10
DOIs
StatePublished - Oct 1 2011

Keywords

  • agency theory
  • corporate strategy
  • governance
  • spin-offs
  • transaction cost economics

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

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