The Separation of Real Estate Operations By Spin-Off |
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| Authors: | Gailen L Hite James E Owers Ronald C Rogers |
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| Institution: | Edwin L. Cox School of Business, Southern Methodist University, Dallas, Texas 75275.;School of Business, University of Massachusetts, Amherst, Massachusetts 01003.;School of Business, University of Connecticut, Storrs, Connecticut 06268. |
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| Abstract: | In this paper, we consider spin-offs as a vehicle to separate real estate operations from other real estate and/or non-real estate operations. For a sample of 33 such spin-offs announced and completed between 1962 and 1982, we document significantly positive abnormal returns around spin-off announcements. Using the standard event-time methodology, we find average excess returns of 5.7% in the two-day interval surrounding the first Wall Street Journal report of a pending spin-off. While the gains associated with spin-offs by real estate firms are positive on average, they are small in comparison to the 9.1% two-day announcement period abnormal returns surrounding proposals by non-real estate firms to divest real estate operations. |
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