The governance and control of voluntary corporate spin-offs

James K. Seward, James P. Walsh

Research output: Contribution to journalArticle

88 Scopus citations

Abstract

We investigate the role that a voluntary corporate restructuring can play in the design of efficient internal corporate control mechanisms. To this end, we examine the post-restructuring internal control practices in 78 voluntary corporate spin-offs that were completed between 1972 and 1987. We find that the selection of the new CEOs, the design of their compensation contracts, and the staffing of the boards of directors and their compensation committees in the spun-off firms can be seen as ex ante efficient. These governance and control practices, however, are not strongly related to the observed positive market reactions to the spin-off announcements. The results indicate that equity reorganizations facilitate the implementation of efficient internal governance and control practices, but that other factors must influence the share price reactions to the announcement of such voluntary corporate restructurings.

Original languageEnglish (US)
Pages (from-to)25-39
Number of pages15
JournalStrategic Management Journal
Volume17
Issue number1
StatePublished - Jan 1 1996

Keywords

  • CEO compensation
  • Corporate governance
  • Corporate restructuring
  • Spin-offs

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

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