Stock market responses to corporate unbundling in South Africa

Abstract

This paper examines the effect of the announcement of a restructuring on the returns of the parent companies and the subsidiaries to be unbundled. Abnormal returns are calculated from sixty days prior to the unbundling announcement to sixty days after the announcement. Positive average abnormal returns are obtained for the parent company, while a cumulative abnormal negative price reaction of eighteen per cent is observed for the subsidiaries. This evidence is contrary to share price reactions in the United States, where abnormal positive returns were observed.