Corporate restructuring, financial deregulation, and firm value: Evidence from Japanese “spin-ins”

This paper examines the impact on firm value from the restructuring process of the keiretsu system due to Japan's deregulation. We focus on unique internal restructuring transactions called “spin-ins” that are triggered by the Amendment of the Commercial Code in 2001. We show that significant positive abnormal returns exist around the announcement of the spin-ins. These announcement returns have a positive relation to keiretsu affiliation and bank financing. Also, we find that Japanese spin-ins result in a significant improvement in investment-Q sensitivity, especially for keiretsu firms. Our results support the argument that the keiretsu system has transformed itself into a more efficient organization through the recent deregulation in financial markets.