Equity carve-outs in Belgium - neglected opportunity or justified rarity?

Abstract

This study examines the preference for spin-offs over equity carve-outs as restructuring method and the corresponding inexistence of equity carve-outs in Belgium. The value creation effects by equity carve-outs and spin-offs will be assessed from the shareholder perspective and the firm perspective. The study also focuses on the role the Belgian legal background plays in the choice between both restructuring methods. I found that spin-offs lead to higher abnormal returns around the announcement date. On the other hand, in terms of operating performance equity carve-out parents and subsidiaries outperform their spin-off counterparts. No relevant differences could be observed for the legal regimes of both operations. Ultimately, the study concludes that equity carve-outs are no justified rarity in the Belgian business world, but there could be other factors limiting their occurrence that need further investigation.