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Examining the performance effects of post spin‐off links to parent firms: should the apron strings be cut?
Author(s) -
Semadeni Matthew,
Cannella Albert A.
Publication year - 2011
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.928
Subject(s) - spin offs , agency (philosophy) , transaction cost , business , agency cost , stock (firearms) , marketing , demographic economics , psychology , economics , industrial organization , finance , sociology , engineering , corporate governance , mechanical engineering , social science , shareholder
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. Copyright © 2011 John Wiley & Sons, Ltd.