1. 1
MASS MEDIA, SPIN-OFF AND INVESTORS’ BEHAVIOUR: THE
WSJ ROLE
1. Introduction
….(1)
2. Literature review
2.1 Spin-off and abnormal return
…(1)
2.2 Media and investors’ behaviour
Factors related to the recent momentum this disinvestment operation has known by virtue of the
latest financial crises, as well as the widespread belief that spin-off announcements may generate
positive abnormal return, have contributed to rousing the debate on spin-off in the past years. This
is a theme on which the media is focusing more and more.
In this regard, one can suppose that following a spin-off announcement, the media may influence
abnormal returns: news concerning spin-off – for instance regarding M&A operations, as well as
other corporate reorganization operations or, more generally, corporate news - can play a significant
role in the investment selection process by influencing the investors’ sentiment.
If information assumes such a pivotal function when it comes to the efficiency of financial markets,
the media is thus fundamental as far as news production and distribution are concerned.
The way news is released, as well as its content, can in fact influence individuals’ behaviour.
Several cognitive studies have addressed this very issue (Baumeister, Bratslavsky, Finkenauer e
Vohs, 2001; Rozin e Royzman, 2001; Shoemaker e Reese, 1996; Gibson e Zillmann, 1994; Reeve,
1992; Fiske e Taylor, 1991; Brief e Motowidlo, 1986; Damton, 1975). Some of these works
(Baumeister et al., 2001; Rozin e Royzman, 2001; Fiske e Taylor, 1991; Brief e Motowidlo, 1986)
demonstrating how people’s perception changes according to news content: negative news has a
bigger impact on an individuals’ perception compared to positive, despite equal levels of
expression.
Other researches focus instead on the way news is communicated, as emotions provoked by news
may influence a person’s behaviour (Reeve, 1992). Shoemaker and Reese (1996) maintain that

2. 2
newspapers tend to highlight some news to attract the public; consequentially journalists opt for
stressing certain aspects of the story in order to produce more engaging articles, thus maximizing
their impact on the readers (Damton, 1975). According to Gibson and Zillmann (1994), the
emphasizing of news increases the reader’s engagement as well as the credibility of the article.
Therefore, news and media influence people’s behaviour, investors in particular: when making a
choice, they act in conjunction with news content and the way in which information is delivered,
thus modifying stock prices trends on the financial markets. Deephouse (2000) claims that the
media can perform two different - often not conflicting - functions within the financial markets. It
may play the role of the information broker, by merely broadcasting information in a “passive”
way, or it can participate “actively” by expressing an opinion, generally regarded as qualified, that
will allow the players in the market to better gauge their investment decisions.
Rindova, Pollock and Hayward (2006) show in detail how crucial the media’s role is in constructing
and consolidating firm celebrity, according to the quantity of news surrounding a certain company
and the positive or negative tones in the story. Media can affect investor’s behaviour to a different
extent, depending on whether it manages to capture their attention (Pollock, Rindova e Maggitti,
2008; Barber e Odean, 2008; Shiller, 2005; Hong, Kubik e Stein, 2004; Barber e Odean, 2003), by
advertising certain stocks more than others (Lehavy e Sloan, 2008; Li, 2004; Huberman, 2001;
Kang e Stulz, 1997): in theory, a pique in the investor’s attention levels may influence financial
markets trends. Several empirical studies focus on this relationship (Chemmanur and Yan, 2011;
Gao and Oler, 2011; Da, Engelberg and Gao, 2011; DellaVigna and Pollet, 2009; Barber and Odean
2008; Cohen and Frazzini, 2008; Peng, Xiong and Bollerslev, 2007; Fehle, Tsyplakov and
Zdorovtsov, 2005; Huberman and Regev, 2001). Chemmanur and Yan (2011) maintain that a rise in
the investors’ level of attention can cause a temporary increase in stock returns, while at the same
time can decrease future profits, both in the short and in the long run.
Furthermore, Engelberg and Gao (2011) affirm that within companies involved in IPO operations,
stock returns are strongly influenced by investors’ attention. DellaVigna and Pollet (2009) compare
the response of stock returns to profit announcements released on Friday – when there is a bigger
chance for investors to be inattentive - with the ones released on other weekdays. The authors have
discovered that amounts and price response is much milder when news is released on a Friday
rather than on other days. Cohen and Frazzini (2008) stress that, in the presence of investors subject
to attention constraints, stock prices do not promptly mirror news concerning their respective
companies. Peng, Xiong and Bollerslev (2007) agree with the hypothesis that in uncertain market
conditions, investors shift their (limited) attention towards more general news concerning the
market, disregarding, as a consequence, news on specific stocks. Fehle, Tsyplakov and Zdorovtsov

3. 3
(2005) assess whether companies can have an impact on people’s attention through the use of
adverts. By taking into account prices and negotiation responses of the companies who created
television adverts during the 19 Super Bowl finals between 1969 and 2001, they came across
significantly positive abnormal returns for all of the companies who were easily recognisable from
the adverts’ content. After analysing the role of media following the financial markets crisis of 1929
and 1987, Shiller (2005) concluded that while news anticipating the crisis did not produce any
major effects, conversely news concerning the crisis itself increased investors’ attention in the
market movements; as a consequence, the role of media in broadcasting price movements becomes
crucial. Barber and Odean (2003) maintain that, given the difficulty in seeking stocks to buy, people
tend to opt for those stocks capable of grabbing their attention. In a study held in 2008, the same
authors empirically describe the effects deriving from this capacity news has to attract investors’
attention, influencing their decision buying process. After observing the behaviour of approximately
10.000 individual investors and 43 institutional investors over a 5 years span, Barber and Odean
(2008) noticed indeed how individual investors, who appear to be generally less informed, tend to
become net buyers of stocks during “the days of great attention”, that is, the days in which: (i) the
underlying company was quoted in newspapers, (ii) trading volume had been higher than the usual,
(iii) the previous day was characterized by a high daily return. On the contrary, institutional
investors, who are more informed, tend to act as net sellers on these very same days. Furthermore,
the media may have an impact on financial markets in as much as it will be able to capture the
investors’ attention, to make information available and finally to allow interaction between the
investors, increasing chances of their investment in the stock market (Hong, Kubik and Stein,
2004). Following this same line of research, Pollock et al. (2008) have examined how the media and
investors allocate their attention and how they consider public businesses involved in an initial
public offering, the subsequent day of the operation. As a result, the increasing attention towards the
enterprise involved in IPO influences financial markets’ trends.
Gon and Oler (2011) compare the returns of companies where takeover operations are anticipated
by rumour with those where they are not. Within the event study methodology, Johnson, Ellstrand,
Dalton and Dalton (2005) analysed the impact made by the publication of administrative
committees’ ratings in the magazine Business Week. The research confirmed their initial hypothesis:
that is, the publication of positive/negative governance news implies positive/negative abnormal
stock returns. Moreover, the publication of governance news (positive or negative) has an even
greater impact compared to the governance information publicly released by the companies on their
abnormal stock returns.

4. 4
The authors observe that in the case that acquisition operations are preceded by rumours, these are
thereby followed by a significant reaction in both returns and negotiated volumes.
Huberman and Regev (2001) compare the impact of a story which appeared in the New York Times
to the impression made by the same story, published over five months earlier, on the magazine
Nature and several other popular newspapers – including the Times. Results show how daily
newspapers can influence stock quotation, even without distributing new information, confirming
the crucial role they exercise on the investors’ attention: indeed, despite being first-hand news, the
impact of the companies’ returns story published in the magazine Nature, is much less significant
when compared to the reaction triggered by the New York Times’ publication of the story. The
modes of news diffusion, if considered in their semantic meaning (that is, the positive or negative
connotation of news content, and the strong or weak tone used) barely influence investors’
behaviour (Carretta, Farina, Fiordelisi, Martelli e Schwizer, 2011; Dell’Acqua, Perrini e Caselli,
2010; Gong e Gul, 2010; Niehaus e Zhang, 2009; Tetlock, Saar-Tsechansky e Mackassy, 2008;
Tetlock, 2007; Doukas, Kim e Pantzalis, 2005; Coval e Shumway; 2001). In fact, the majority of
investors chiefly focus their attention on the impact of information diffused by specialised press and
telematics channels (Salter, 2008; Core, Guay e Larcker, 2008; Dick e Zingales, 2008; Das e
Chen,2007; Antweiler e Frank, 2004; Stiglitz, 2002; Tumarkin e Whitelaw, 2001; Choi, Laibson e
Metrick, 2000; Bagnoli, Beneish e Watts, 1999; Wysocki, 1998; De Angelo e Gilson, 1996; De
Angelo, 1994). The work of Carretta et al. (2011), is of particular relevance as far as the impact of
news semantics on the markets are concerned. Within the Italian market, a relationship was
discovered between investors’ behaviour, the tone used (strong or weak) and the meaning (positive
or negative) of corporate governance news, published by the Italian specialised press. In order to
examine news’ positive or negative value and its tone, the authors used the method of text analysis.
They then constructed an event study to evaluate the impact of such news on stock prices. From the
analysis it thus emerged that the tone used when news is released has a positive influence on
cumulative abnormal returns in fruitful enterprises: this assumption lies on the idea that investors,
influenced by the tone used in news concerning successful companies, tend to buy their stocks. In
the same study it was also observed how certain themes have a greater impact on stock returns of
the companies involved compared to other ones. Gong and Gul (2010) investigated the impact of
media coverage on Chinese investors’ behaviour in the years between 2000-2006. They proposed a
unit of measurement for media coverage, which takes into account news quantity as well as its
quality, intended as the value of its content. This unit is compared to an index of media coverage

5. 5
that evaluates news frequency. According to both media coverage measurements, higher values
correspond to higher participation in the market. Furthermore, the empirical analysis shows how
news quantity has a greater impact on the investors’ decisions, while the variable quality appears
negligible. Dell’Acqua, Perrini e Caselli (2010) noted, with regard to prices instability, that it
diminishes in the case of high-tech companies’ stocks, quoted in the American markets, in
connection to the voluntary disclosure following the introduction of the Regulation Fair Disclosure,
issued by the Securities and Exchange Commission (SEC), in the Selective Disclosure and Insider
Trading Act.
As for the relationship between information diffusion and negotiation volumes, Niehaus and Zhang
(2009) verified that on average the share of every broker increases by 0.8%, in terms of trading
volume, when the analysis of a particular stock is disclosed. Tetlok, Saar-Tsechansky and Mackassy
(2008) and Tetlock (2007) identified a connection between news related to some companies
published on the Wall Street Journal and the following trend in stock quotations. More specifically,
these contributions identified a statistically significant relationship between the value of the news
concerning single companies and trading volume, returns and prices volatility of their stocks. In
addition, Tetlock (2007) observed that the media’s pessimism level, if unusually high or low,
forecasts high market trade volumes. According to Tetlock, Saar-Tsechansky and Mackassy (2008),
the percentage of negative words in news regarding a certain company announces a variation in its
profitability index. Moreover, as far as news content is concerned, they noticed that some news has
an effect in the short term, others in the medium and long term. When it comes to stock returns, the
excessive diffusion of market analysis can increase investors’ optimism, generating overvaluation
and low future returns (Doukas, Kim e Pantzalis, 2005). According to the existing literature on the
influence of media channels on investors’ decisions, specialised press may not play such a
significant role, positive or negative, in the financial markets (Joe, Louis e Robinson, 2009; Core,
Guay e Larcker, 2008; Salter, 2008; Ryan e Taffler, 2004; Moss, 2004; De Angelo e Gilson, 1996;
Berry e Howe, 1994; Mitchell e Mulherin,1994; De Angelo et al., 1994; Cutler, Poterba e Summers,
1989; Jensen, 1979). Basing their research on Niederhoffer’s contribution (1971), Cutler, Poterba e
Summers (1989) demonstrated that by taking into consideration macroeconomic news on the US
market, only a third of market index variance is explained. Furthermore, throughout the most
important social or political events, they did not notice any significant movements in the market,
which instead can be identified during those days when no major news release took place. Further
researches (Mitchell and Mulherin,1994; Berry and Howe, 1994) highlight how financial press can
have a small influence on stock returns and trading volume beyond the short term. On the other

6. 6
hand, Ryan and Taffler (2004) later demonstrated how within the British market, significant
variations in stock prices and trade volume are driven by firm-specific news. However, these studies
do not highlight the factor of media effects, nor do they exclude that media coverage may influence
single enterprises, or more generally the market, in different ways than immediate variations in
trade prices and volume. Press can be considered to play a negative role as an information mediator,
when it focuses on certain news which is bound to provoke a strong reaction, in order to sell more
copies of the newspaper (Core, Guay e Larcker, 2008; De Angelo e Gilson, 1996; De Angelo,
1994; Jensen, 1979): on this topic, some studies, included Moss (2004) demonstrate how by
manipulating information, the press has often led investors to mistakes.
Another scholarly trend, following Stiglitz (1999, 2002) and Dick and Zingales (2002, 2008),
maintains that the press plays a positive role in the fields of corporate finance, corporate
governance, economic development and politics: by broadcasting information it promotes
transparency and at the same time exposes this to public judgement directors, politicians and
regulators. The Wall Street Journal played a pivotal function in pointing out the problems within
the company Enron, therefore leading to inspections by the regulatory organisations and later on to
the fall of the company itself (Salter, 2008). Following the same scholarly trend, Joe, Louis and
Robinson (2009) found that when the media publicly exposes the ineffectiveness of a certain
company’s board, the company is forced to undertake corrective actions in order to protect the
shareholder value. More specifically, they also noticed that single investors react in a negative way
to media exposure, while institutional investors do not express any negative reaction, as they tend to
expect those corrective actions undertaken by the companies. In comparison with the specialised
press, the Internet is a communication channel capable of spreading news at a much faster rate; it
also allows people to exchange opinions on investments, practically for free (Das e Chen, 2007;
Antweiler e Frank, 2004; Tumarkin e Whitelaw, 2001; Choi, Laibson e Metrick, 2000; Bagnoli,
Beneish e Watts, 1999; Wysocki, 1998).
In the light of the literature presented, this work aims to establish whether media has an impact on
the investors’ behaviour following a spin-off announcement. In this perspective, the hypotheses
underpinning the work are the following:
H1: the diffusion of news by specialised press increases the effect that the announcement of the
operation will have on the investors’ behaviour, reflected in stock price variations.

7. 7
H2: the semantic aspect of the news concerning spin-off operations, considered in terms of negative
versus positive content and of its tone, increases the effect of the announcement on the investors’
behaviour
H3: the effect provoked by the announcement of a spin-off operation on stock prices, appears to be
increased for those operations under the attention of the investors, in the week of the
announcement.
3. Methodology
3.1 Text analysis
The text analysis methodology (Stone, Dunphy, Smith e Ogilvie, 1966) was used with the aid of the
software Wordsmith 4 (Scott, 1999) developed by Oxford University. This was employed in order
to investigate the nature of the influence of news concerning spin-off operations published on the
Wall Street Journal - the second best-selling newspaper in the US1
. It was also used to investigate
the creation of expectations amongst investors, keeping into account the importance of news’
positive vs. negative character as well as its tone when it is released (Carretta and oth., 2011). All
news analysed during the analysis has been extracted from the Factiva database, which allows
access to more than 10.000 sources ranging from newspapers, magazines, press agencies and
informative websites. The scope of the analysis is to determine the valence and the expressive
strength of spin-off news appearing on the Wall Street Journal between 2000 and 2012 and which
refer only to the quoted societies (approximately 105, for a total of 94,383 words), by using the
Harvard IV Psycho – Social dictionary (Kelly and Stone, 1975) as well as the Wordsmith 4
software. In every story, Wordsmith 4 effectively calculates the number of words which fall into the
categories positive/negative and strong/weak in the Harvard IV Psycho – Social dictionary: every
category contains a list of words, whose recurrence in the text will help classifying a story as
positive/negative, strong/weak. However, due to the presence of words within the “negative”
category (such as cancer, mine or capital), which do not allow the identification of negative
financial events without ambiguity, this work opted for Loughran and McDonald revised list
(2011), which instead takes into account only those words with a financial connotation. More
precisely, the negative category consists of 2,337 words, while 353 are included in the positive one;
similarly, 27 entries are counted in the category of words expressing a weak expositive tone, 19 in
1
According to Editor & Publisher

8. 8
the category of words indicating a strong tone. Using word lists of different lengths might influence
the skewness of the distribution when it comes to both the value of the news content and the tone
used when it is released. Despite this, it was nonetheless decided to use this dictionary as it not only
foremost allows for result stability and reproducibility, but also as the issue can become restricted
when considering the amount of times different words from each category (positive/negative,
strong/weak) recur in the text. In determining the value of news content (positive/negative) and tone
(strong/weak), the scale of judgment proposed by Osgood, Suci e Tannenbaum (1957) was adopted.
This scale represents the way one can relate to a certain news story, according to its content: the
valence represents a value judgement and helps in establishing to what extent news can be
considered positive or negative, while the expositive tone represents the strength or the intensity
expressed by the news story. In order to ascertain the news’ valence, the formula adopted is the
following:
(P – N)/ W
where P and N are respectively the number of positive and negative words within the news,
according to Harvard IV Psycho – Social dictionary classification; W stands for the overall amount
of words contained in the document examined. The value thus obtained ranges between -1 (wholly
negative news) and 1 (wholly positive news).
In order to assess the expositive tone during news release, the formula adopted is the following:
(F – D)/ W
where F and D are respectively the number of strong and weak words within the news, according to
Harvard IV Psycho – Social dictionary classification; W stands for the overall amount of words
contained in the document examined. The value thus obtained ranges between -1 (wholly weak
news) and 1 (wholly strong news).
3.2 Investors’ attention index
In order to verify whether during the spin-off announcement (and rumour) week the level of
investors’ attention proved to be abnormal, the indicator ASVI (Abnormal Search Volume Index),
proposed by Da, Engelberg e Gao (2011), will be employed. This measurement bases itself on the
index SVI (Search Volume Index), publicly available on Google Trends
(http://www.google.com/trends/) for the companies selected for this analysis. The premise behind
the use of this instrument of attention level measurement is, according to Da, Engelberg and Gao
(2011), that if someone is looking up something in a search engine, they are likely to be paying

9. 9
attention to the object of their research. Furthermore, the percentage of Internet users accessing
Google on the 4th of November 2014 corresponds to 73,07% (source: http://www.alexa.com).
Several studies support the efficiency of this instrument in predicting the level of people’s
awareness (Carretta, Farina, Graziano, Reale, 2013; Carretta, Farina, Nako, 2012; Da, Engelberg,
Gao, 2011; Choi, Varian, 2009; Ginsberg, Mohebbi, Patel, Brammer, Smolinski e Brilliant, 2009).
The weekly series of the SVI index has been downloaded for each company examined. In order to
increase the accuracy of the analysis, it was decided to consider the researches for the selected
companies on Google through ticker, paying attention to the presence of potential noisy tickers.
This decision was taken because identifying the frequency of researches through the company’s
name might be problematic for two reasons: to begin with, people may research the same company
using several possible variations of its name. Finally, a “Finance” filter was applied to the research
category so as to download the historical series showing the variation of researches over time,
expressed as a growth percentage compared to the first date on the graph (or compared to the first
date in which data is available).
According to the study of Da et al. (2011), the ASVI index is defined as:
𝐴𝑆𝑉𝐼𝑡 = log(𝑆𝑉𝐼𝑡) − log[𝑀𝑒𝑑𝑖𝑎𝑛𝑎(𝑆𝑉𝐼𝑡−1, … , 𝑆𝑉𝐼𝑡−8)]
Where:
log(SVIt) represents the logarithm of the index SVI during week t;
log[Mediana (SVIt-1,…,SVIt-8)] represents the logarithm of the index SVI median during the
preceding 8 weeks.
3.3 Event study
The analysis of news impact on the returns of those company involved in spin-off operations is
undertaken by using the event study methodology. This allows for the verification of the presence
of abnormal return (AR) within the stocks of those companies affected by news concerning the
spin-off operations implemented. For every company, abnormal returns are estimated through
Sharpe’s Market Model (1963), with an Ordinary Least Square (OLS) regression over an estimation
period of 252 days in the market, preceding the most remote event window (Carretta et al., 2011;
Mentz e Shiereck, 2008).
𝐴𝑅𝑗,𝑡 = 𝑅𝑗,𝑡 − 𝛼̂𝑗 − 𝛽̂𝑗 𝑅 𝑀,𝑡
Where:

10. 10
Rj,t is the actualized return, corrected by the dividend of the stock j on the day t; RM,t is the index of
the national market return in the branch which the company belongs to on t day. In order to verify
statistical significance, it was decided to follow the approach taken in a few recent studies (Mentz,
Schierek, 2008), that suggest the implementation of Boehmer’s et al. test statistic (1991), which
applies a correction factor to the standard deviation.
When it comes to determining the magnitude of the event window, the present work uses a window
preceding the date of the information disclosure [i.e. (–1; 0)], the date of the information disclosure
(announcement/rumour) [i.e. (0; 1)] and five further windows [i.e. (0; 3), (0; 5), (0; 10), (0; 15) e
(0;20)]. The choice to consider the event window prior to the information disclosure allows the
examination of whether the information produced an abnormal effect before the operation
announcement, due to the market’s ability to anticipate it.
Correspondingly, predicting event windows following information disclosure gives the chance to
assess the market reaction in the following phase. The presence of positive abnormal returns in the
pre-disclosure phase would imply the presence of “informed” investors; negative abnormal returns
in the post-disclosure phase could instead expose the presence of market inefficiencies.
Figure 1 shows the calculation mode used.
<FIG.1>
4. Sample
The spin-off operations relevant to the scale of this analysis are those surveyed by the database
Zephyr - Bureau Van Dijk between 2000 and 2011. Only the operations implemented by the quoted
parent companies where the date of the operation announcement (rumour) is definitely known were
selected. Such conditions are essential in order to assess, through the event study methodology, the
abnormal returns of the stocks in the companies involved. For each and every operation, the
historical series of the parent company’s returns was extracted from the database Datastream. It
was decided to use the series of total return prices, as it included capitalised dividends over that
time span; from this series, daily profits were singled out through the logarithm of the relationship
between the price on day t and the price on day t – 1. As far as benchmarks were concerned, the
sectorial indexes referring to those markets in which the companies analysed were quoted:
therefore, the results obtained will not be concerning a single stock market.
The chosen benchmarks, always being total returns extracted from the database Datastream, are
summarised in table 1. The daily return was calculated for every index selected, as a logarithm of
the relationship between the price on day t and the price on the day t – 1; this return is used together

11. 11
with the daily variation of the stock (being the news’ object) for the estimation of both the angular
coefficient and the y-intercept of the linear regression.
< TAB. 1>
It was decided to eliminate the operations related to companies where their historical series –
necessary for an evaluation of the market model over a span of 252 days – were unavailable; the
final sample is composed by 176 companies, so arranged in table 2.
<TAB.2>
The number of operations was very restrained between 2000 and 2003; it increased between 2004
and 2011, to finally slow down again in the last year. This trend mirrors the impact of the economic
crisis, a confirmation of the fact that such operations are widely employed in a negative economic
climate. When it comes to the geographical connotation of the parent company, a certain
preponderance of North American companies was noticed, followed by European, Indian and East
Asian companies. The reaction of the market to the operation announcement, intended as a press
release, will be observed in relation to a few variants; doing so will help with understanding
whether news publication, its semantic aspect and the investors’ attention level contribute to value
creation or to value destruction for shareholders.
To begin with, the sample is divided in spin-off operations announced on the “Wall Street Journal”,
and operations that instead were not. The sample turns out to be composed by 90 operations
published on the “Wall Street Journal” and 86 operations that did not appear on the same daily
newspaper. The spin-off operation disclosed by the “Wall Street Journal” appear to be roughly half
of the overall sample size. This trend can be reasonably explained by media choices of publishing
only spin-off announcements involving more relevant companies2
. As far as the publication on the
“Wall Street Journal” is concerned, according to the existing literature, it is deemed necessary to
observe the very moment in which it takes place.
According to the date of publication, the following instances were identified:
i. 66 occasions in which news was published in a date prior to the announcement date (so-
called rumours)
2
It is not a case that companies such as Motorola, Fujitsu, GUS plc et al. are included in this portion of the sample.

12. 12
ii. 14 occasions in which news appeared on the Wall Street Journal on a date following the
announcement date, but no later than a week afterwards3
;
iii. 5 occasions in which the publication date corresponds to the announcement one4
;
As far as news’ semantic aspect is concerned, analysed from the point of view of its
positive/negative content and its strong/weak tone, and according to the measurements of sentiment
employed, the following instances stand out:
i. 30 instances in which the valence of the news content – concerning spin-off operations -
proves to be positive and 48 cases in which it appears to be negative5
;
ii. 63 instances in which the expositive tone was classified as strong, 19 instances in which,
conversely, the tone is identified as weak6
.
According to the measurement of the investors’ attention level employed, a distinction can be made
between 82 spin-off operations which recorded an abnormal level of research on Google during the
announcement week, and another 94 operations in which this does not occur.
Finally, in order to verify whether in the case of a rumour about spin-off operations, the impact on
the returns on the date of the announcement will appear less significant than the effect on the day of
news disclosure, the empirical test was repeated on those 66 companies subject to rumour, taking
the date of news publication on the Wall Street Journal as the event date.
5. Results
5.1 Overall result of the sample
Table 3 shows the estimated average CAR in different time slots, referring both to the complete
sample and to the spin-off operations published on the Wall Street Journal.
3
One must bear in mind that the stock week is formed by 5 working days; the essay is thus referring to the event
window (0.5).
4
5 operations were excluded from the counting as their publication date was later than the announcement date, and
therefore cannot be part of the event window (0.5).
5
According to the measurement of sentiment employed, in the remaining 12 cases, it was not possible to define the
value of the content of the news examined.
6
According to the measurement of sentiment employed, in the remaining 8 cases, it was not possible to classify the
expositive tone of the news examined.

13. 13
The results of the significance test (Z-stat) are also reported here, together with the minimum and
maximum value of the calculated CAR and with the percentage of companies who experienced
abnormal positive returns.
The analysis was based on event windows prior to and following the dates of news announcement
and news disclosure, so to understand whether cumulative abnormal returns are a consequence of
market reactions and/or its ability to anticipate news.
In regard of the whole sample (Table 3 – Panel A), for the greater part of the event window
examined, value creation for the shareholders of the involved companies is highlighted; however it
is only statistically relevant in the time slots (-1,1), (-1,0) and (0,1), where the average CAR values
correspond to 1,34%, 1,04% and 0,59% respectively.
This result confirms Veld and Veld-Merkoulova thesis (2004), according to which the
announcement of a spin-off operation is received positively by the market, generating positive
returns on average, especially around the date of the announcement, to then return to normal values
in the following days.
By observing the spin off operations announced on the Wall Street Journal, average positive CAR
is found in all the event windows examined, except for symmetrical windows (-20, 20) and (-
15,15); however, they only just become statistically relevant in the event window (-1,1), (-1,0) and
(0,1), with a confidence level of 95% in the first two and of 90% in the window (0,1), identifying
values equivalent to 1,23%, 0,91% and 0,73% respectively. The diffusion of the news by the press
enhances the effect generated by a spin-off announcement, thus confirming Huberman e Regev
results (2001).
<TAB.3>
In reference to the results obtained the moment when news is disclosed on the Wall Street Journal
(Table 4), if the operation is subject to rumour (Panel A), positive abnormal returns will be on
average remarked in all of the symmetrical windows following the announcement date, although
they can be considered statistically relevant only in the windows (-1,1), (-1,0) and (0,1). Similarly to
what occurs when considering whether news is published or ignored by the “Wall Street Journal”
(Table 3 – Panel B), the effect produced by the announcement of spin-off operations on the returns
of the companies involved appears to be amplified if the press disclosed news on a date prior to the
announcement. This confirms Gao and Oler’s findings (2011), according to whom the returns of
those companies implementing takeover operations are influenced by rumour. The same occurs for
the spin-off operations published on the Wall Street Journal within a week of their announcement

14. 14
(Table 4 – Panel B): in the event windows (-1,0) and (0,1) both average and significant cumulative
positive returns are displayed.
These results confirm Johnson at al. (2005) as well as Huberman and Regev’s results (2001),
according to whom the top and leading newspapers can influence stock trends without even
providing any new information. The publishing of news concerning a spin-off operation, despite not
being first-hand as it follows the operation announcement, still contributes to value creation for the
shareholders.
<TAB.4>
The research then proceeded in observing the average CAR, in relation to the positive vs. negative
value of news’ content and to the expositive tone adopted in its diffusion (Table 5). With regard to
news’ positive content (Table 5 – Panel A), positive and statistically relevant cumulative abnormal
returns are detected in the 7 day and 3 day event windows: if the news on the spin-off operation is
reported in a positive way by the Wall Street Journal, the impact on stock return for the societies
affected by the announcement appears to be larger. In the case of negative content of news
concerning spin-off (Table 5 – Panel B), average positive CAR is detected in all of the time slots
examined7
, although only statistically significant in the event window (-1,1) e (-1,0). Against the
expectations expressed, this result proves that negative news can also have on average a positive
impact on the performance of the companies involved in spin-off operations: the positive impact
seems to prevail in spite of the negative sentiment expressed by the media. Similarly, when
considering the results relative to the expositive tone used in news disclosure, the investors react
around the date of the spin-off announcement, in case of news “vehemently”8
diffused (Table 5 –
Panel C): indeed, the time slots displaying average positive CAR (as well as statistically relevant)
are the three day span following the announcement date and the slot related to the event window.
On the contrary, when news is spread adopting a weak expositive tone (Table 5 – Panel D),
statistically significant positive average abnormal cumulative returns can be noticed in the event
windows (0,20) and (0,10): in those cases where less emphasis is put on the spin-off news, the
impact on companies’ performance will appear only in that phase following the operation
announcement.
This result implies that investors’ reaction is delayed for news released in weak expositive tone, so
that average positive and significant CAR are registered only in a later phase, after the
announcement of the spin-off operation.
<TAB. 5>
7
Except for the event window (-15, 15) whose negative value does not achieve statistical significance
8
Probably related to those spin-off operations implemented by important firms, often their disclosure is strongly
emphasized.

15. 15
Finally, the average CAR is examined, in relation to unusually high levels of attention in the
investors during the spin-off announcement week. As one can notice, there are no significant
reactions in the market: the investors’ attention levels practically do not affect stock returns for
those societies involved in spin-off operations, in contrast with the hypotheses expressed.
<TAB. 6>
5.2 Results about the spin-off operations subject to rumour
Table 7 (Panel A) shows the estimated average CAR for those spin-off operations published on the
Wall Street Journal on a date prior to the operation announcement, taking the date of news
publication as the event date. As displayed in the time slot (-1,0), an abnormal positive return -
statistically significant - can be observed, with a confidence level of 95%: it thus seems that
investors anticipated the spreading of the rumour by means of press, highlighting with every
likelihood the presence of informed investors on the market. These results may also be interpreted
as the revelation of inside trading activity. This may well be considered a plausible hypothesis, yet
it does not seem likely. Insider trading usually occurs in secret circumstances (for instance, when
negotiating small quantities repeatedly in time) in order to avoid abnormal variations on the stock
returns that would expose the event to the market before its official announcement, and at the same
time reveal to the authorities the unlawful activity.
In the slots following the rumour publication date, value destruction arises for shareholders of those
societies involved in spin-off operations. This result implies that, after the initial positive reaction
(which anticipated the spreading of the news) as far as the investors are concerned, the shareholders
react negatively to the publication of the rumour on the Wall Street Journal, judging it less reliable
than the official announcement of the operation. Such reaction is confirmed for the average CAR
found also in the slot (-1,0): the investors react in a significant manner to the publication of the
rumour on the Wall Street Journal.
From the comparison between average cumulative returns, the date of the announcement of the
operation and the publication of the rumour on the Wall Street Journal (Table 7 – Panel B), it
emerges that, in the symmetrical temporal slot with the exception of the event window (-1:1), the
spread of the rumour generates a supplementary-return. The average CAR displayed in the slot (-
1,0) confirms such reaction: the investors respond in a significant manner to the publication of the
rumour on the Wall Street Journal. Instead, in the following time slots, it is the announcement that
creates value for the shareholders. The investors in the phases following the information diffusion

16. 16
appear to place more confidence in the announcement, rather than in the publication of the rumour.
This being an official statement, they feel “reassured” of the fulfilment of the operation. News of
the spin-off operation produces an impact on investors’ behaviour, not only when the rumour is
published on the Wall Street Journal, but also when the operation itself is announced: yet, the
reaction is more visible at the time of the publication of the rumour, as higher average CAR is
achieved, compared to the time of the announcement.
The effect generated by the publication of the news on the Wall Street Journal on a date prior to the
spin-off announcement is not entirely extinguished: indeed, at the time of the announcement, a
positive abnormal cumulative return is, on average, distinguished, although it is less significant.
Some investors do not appear to be affected by the publication of the news on the Wall Street
Journal as they place more confidence in the announcement of the spin-off operation.
<TAB.7>
6 Conclusion
The media is relevant to the process of news disclosure and circulation within financial markets.
The semantics, the level and the moment in which news is disclosed may contribute to the
formation of the investors’ expectations on the returns of the subjects operating on the market,
thereby improving the market’s informational efficiency.
In the past few years, the media has put aside an increasingly significant space to corporate
reorganization operations, chiefly to spin-off operations, to which companies resort to ever more
often given the recent financial crisis.
On one hand, the economic crisis uncovered companies’ weaknesses on both the industrial and the
financial level, on the other, it constituted a chance for these very same companies to rethink their
strategies and their internal structures in order to boost their growth and their competitiveness.
This study aims to assess whether the effect generated by the announcement of a spin-off operation
on companies’ performances can be amplified by the circulation of spin-off news in the following
ways: (i) within specialised press; (ii) by its semantic aspect, examined in terms of positive vs.
negative content value and expositive tone; (iii) by abnormal attention level from the investors’
side.
Using the database Zephyr – Bureau Van Dijk, 176 spin-off operations were selected. All of them
were implemented between 2000 and 2012 by quoted parent companies and the dates of the
announcement are definitely known. Amongst these operations, 90 were published on the Wall
Street Journal: the news (approximately 105 pieces, an overall number of 94,383 words) was

17. 17
obtained from the database Factiva and through the text analysis methodology it was possible to
define the positive or negative value of the content and the expressive tone used. The results of the
analysis carried out as an event study (with observation of abnormal returns on event windows of
diverse scale) show how the announcement of a spin-off operation, when considering the entire
sample, generally generates value creation for the investors of the companies involved.
This confirms the evidence presented by the existing literature, according to which the
announcement of a spin-off operation is received in a positive manner by the market, producing
positive returns on average, especially around the announcement date, to then return to normal
values in the days following the announcement. The announcement itself has the ability to release
the economic value hidden within the parent company. Such a result proves even more evident if
related to the market reaction in relation to spin-off operations reported on the Wall Street Journal:
the investors seem to appraise stocks coming from companies implementing spin-off operations
which were discussed by the press, thus amplifying the effect of the announcement on returns, quite
notably in the day following the announcement itself. As far as the publication on the Wall Street
Journal is concerned and according to the literature examined, it is deemed necessary to identify the
moment in which publication occurs. Similarly to what happens when taking into consideration
whether news was published or not on the Wall Street Journal, the effect generated by the
announcement of spin-off operations on the returns of the companies involved appears to be
amplified if news was disclosed by the press on a date prior to the announcement. This supports
Gao and Oler’s results (2011), according to whom the returns of those companies undertaking
takeover operations appear to be influenced by the spread of rumours. This effect seems even more
evident for those spin-off operations published on the Wall Street Journal within a week of their
announcement, confirming Johnson et al. (2005) as well as Huberman and Regev’s (2001) findings,
according to whom the top and leading newspapers can influence stock trends, even without
providing any new information. The publication of spin-off news, even if not “first-hand” news as
it follows the announcement, contributes de facto to value creations for the shareholders.
When it comes to the semantic aspect of news, in relation to the positive vs. negative value of its
content, it appears that when press “speaks well” of the operation, the average abnormal return
prove to be amplified around the announcement date. However, even in the case of news carrying a
negative value, the market reacts positively to the announcement of the operation: the positive
effect provoked by the spin-off announcement seems to prevail against the negative sentiment
expressed by the media. In relation to the expositive tone used in news release, it is noticed that
investors react positively in the case of news circulated with greater emphasis, and, with every

18. 18
likelihood, relating to the most significant parent companies. Conversely, in the case of news
declared in a weaker tone, the reaction of the investors to the spin-off operation announcement is
delayed: the emphatic aspect of the news released seems to affect more so the timing of the reaction
rather than its direction. In contrast with the expectations expressed and with the evidence found in
the literature, the abnormal attention levels from the investors’ side during the week of the
announcement leave the stock return of the societies involved in the operation essentially
unchanged. However the lack of significance in the CAR, in this case, cannot be interpreted as a
signal of the fact that the investors attention level does not determine any reaction on the market:
existing studies demonstrate how this variable mostly affects traded volumes. With the intention of
further examining this analysis, the limit will be removed by introducing the variable of the
volumes traded on the markets examined.
Finally, by comparing the average abnormal cumulative return registered on the date of the
announcement with the ones of the date of the rumour publication on the Wall Street Journal, it is
observed that in the symmetrical windows, it is the rumour publication which generates a
supplementary-return, while in the following windows, the announcement creates value for the
shareholders.
The investors seem to place more confidence in the announcement rather than in the publication of
the rumour, inasmuch as being an official statement, it “reassures them” of the fulfilment of the
operation. In relation to the event date taken into consideration, news on the spin-off operation
produces an impact on the investors’ behaviour, both in the moment when the rumour is published
on the Wall Street Journal and when the announcement of the operation itself is released (although
the reaction is more evident at the moment of the rumour’s publication, during which average
higher CAR is achieved compared to when the operation is announced). The market however, does
not completely extinguish the effect generated by the publication of the news on the Wall Street
Journal on a date preceding the announcement of the spin-off operation: indeed, at the time of the
announcement and although less significant, an abnormal cumulative return is distinguished.
Some investors therefore seem to remain indifferent to the publication of news on the Wall Street
Journal, placing more confidence in the announcement of the spin-off operation.
The media factor, when it comes to spin-off operations, acquires relevance as it influences the
investors’ behaviour. If the news of the spin-off operation is spread “by the means of the press”,
irrespective of the time when it ensues, the spin-off operation will cause value creation for the
shareholders, proving to be even more effective in liberating the economic value hidden within the
parent company. Hence, the contribution of this study to the existing literature is believed to be

19. 19
twofold: to begin with, it contributes in enriching spin-off literature by taking into account the
factor media; it also attempts to increase the number of studies on the impact of media on investors’
behaviour. Future developments of this study will on one hand focus on removing the limits of both
the methodology and the data used and previously discussed, where possible. On the other hand, the
focus will also be on integrating an analysis of variables that will allow in examining whether and
in what way the investors’ characteristics influence the use and the elaboration of the information
employed.

20. 20

21. 21

22. 22