CROSS-SECTIONAL CORRELATION FROM PERIOD BASED SUBSAMPLING – MALAYSIAN CORPORATE SPIN-OFFS

Abstract

This paper aimed to report evidence on the effects and corresponding remedial measures of cross-sectional correlation arose due to a period-based subsampling for the case of Malaysian corporate spin-offs’ shareholders wealth effect measurements. We examined shareholders' wealth effect of 90 listed companies’ corporate spin-off announcements from the year 1987 to 2019 in Bursa Malaysia, previously known as Kuala Lumpur Stock Exchange and evaluate the cascading intensity arised through different periods of financial market conditions as sub-sampling criteria. The market Model analysis showed that spin-offs in Malaysia generally resulted in statistically significant positive short term cumulative average abnormal returns. We found the sub-sampling led to a higher intensity of cascading data points. Spinoffs wealth effect measurements under normal market conditions sub-sample group reported different statistical significance results when we use robust statistical tests. Whereas the other sub-sample group during financial crisis have consistent statistical significance on wealth effects measurements irrespective of statistical tests, and thus we conclude the distortion of the effects were minimal