Title: Politically linked spin-offs: evidence from Malaysia

Authors: Nadisah Zakaria; Glen Christopher Arnold

Addresses: Department of Finance, College of Business and Administration, Prince Sultan University-College for Women, P.O Box 53073 Riyadh 11586, Kingdom of Saudi Arabia ' Opus Eris Ltd., Headlands Farm, 36 West End, Long Clawson, Leicestershire, LE14 4PE, UK

Abstract: This study investigates the short- and long-run share return performance of politically linked companies in the event of a spin-off during the period 1980 to 2011. The result shows that the group of politically linked parent companies significantly outperformed the group of non-politically linked companies during the few days surrounding the announcement date even after an adjustment for size. This indicates that the market anticipates increased value for politically linked parent's shareholders and potential exploitable stock market inefficiency. However, after allowing for size, evidence indicates that spin-offs by the politically linked entities do not demonstrate abnormal performance in the subsequent three-year period.

Keywords: politically linked companies; PLCs; politics; government-linked companies; GLCs; market efficiency; spin-offs; share returns; returns performance; shareholder value; stock markets.

DOI: 10.1504/IJBD.2016.081374

International Journal of Bonds and Derivatives, 2016 Vol.2 No.4, pp.304 - 328

Received: 13 Nov 2015
Accepted: 26 Dec 2015
Published online: 06 Jan 2017 *

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