To Spin or Not to Spin? Carbon Exposure and Parent Firm Credit Risk after Spin-Offs
(2026) BUSN79 20261Department of Business Administration
- Abstract
- Seminar date: 2026-06-04
Course: BUSN79 - Degree Project in Accounting and Finance
Authors: Marcus Brodin and Sebastian Dolk Persson
Advisor/Examiner: Reda Moursli/Diem Nguyen
Key words: Spin-Off, Transition Risk, Carbon Intensity, Credit Default Swap Spread, Probability of Default.
Purpose: This paper examines how spin-offs affect the parent firm's credit default swap spread and probability of default, and whether this effect depends on the relative size and carbon exposure of the divested entity.
Methodology: Panel regressions are estimated on parent–spin-off pairs around the spin-off event, with credit risk measured through the five-year credit default swap spread and probability of default. Three hypotheses are tested, the... (More) - Seminar date: 2026-06-04
Course: BUSN79 - Degree Project in Accounting and Finance
Authors: Marcus Brodin and Sebastian Dolk Persson
Advisor/Examiner: Reda Moursli/Diem Nguyen
Key words: Spin-Off, Transition Risk, Carbon Intensity, Credit Default Swap Spread, Probability of Default.
Purpose: This paper examines how spin-offs affect the parent firm's credit default swap spread and probability of default, and whether this effect depends on the relative size and carbon exposure of the divested entity.
Methodology: Panel regressions are estimated on parent–spin-off pairs around the spin-off event, with credit risk measured through the five-year credit default swap spread and probability of default. Three hypotheses are tested, the baseline effect of spin-offs on credit risk and the moderating effects of the relative size and carbon exposure of the divested entity.
Theoretical perspectives: Coinsurance Hypothesis, Information Asymmetry, Wealth Expropriation Hypothesis, Environmental Management Model, Stakeholder Theory.
Empirical foundation: The sample consists of completed international spin-offs from Capital IQ Pro from 2004 onward, with separate CDS and PD samples constructed after applying sample restrictions and requiring Scope 1 and 2 emissions data for both the parent and divested entity.
Conclusions: Spin-offs are associated with an increase in the parent firm's structural default probability concentrated in the fiscal year of separation, while producing no detectable response in market-priced CDS spreads. The increase is concentrated in larger transactions and the carbon profile of the divested entity operates in the direction predicted by environmental finance theory, though statistical significance is marginal. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/student-papers/record/9245778
- author
- Brodin, Marcus LU and Dolk Persson, Sebastian LU
- supervisor
- organization
- course
- BUSN79 20261
- year
- 2026
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Spin-Off, Transition Risk, Carbon Intensity, Credit Default Swap Spread, Probability of Default.
- language
- English
- id
- 9245778
- date added to LUP
- 2026-07-01 12:31:20
- date last changed
- 2026-07-01 12:31:20
@misc{9245778,
abstract = {{Seminar date: 2026-06-04
Course: BUSN79 - Degree Project in Accounting and Finance
Authors: Marcus Brodin and Sebastian Dolk Persson
Advisor/Examiner: Reda Moursli/Diem Nguyen
Key words: Spin-Off, Transition Risk, Carbon Intensity, Credit Default Swap Spread, Probability of Default.
Purpose: This paper examines how spin-offs affect the parent firm's credit default swap spread and probability of default, and whether this effect depends on the relative size and carbon exposure of the divested entity.
Methodology: Panel regressions are estimated on parent–spin-off pairs around the spin-off event, with credit risk measured through the five-year credit default swap spread and probability of default. Three hypotheses are tested, the baseline effect of spin-offs on credit risk and the moderating effects of the relative size and carbon exposure of the divested entity.
Theoretical perspectives: Coinsurance Hypothesis, Information Asymmetry, Wealth Expropriation Hypothesis, Environmental Management Model, Stakeholder Theory.
Empirical foundation: The sample consists of completed international spin-offs from Capital IQ Pro from 2004 onward, with separate CDS and PD samples constructed after applying sample restrictions and requiring Scope 1 and 2 emissions data for both the parent and divested entity.
Conclusions: Spin-offs are associated with an increase in the parent firm's structural default probability concentrated in the fiscal year of separation, while producing no detectable response in market-priced CDS spreads. The increase is concentrated in larger transactions and the carbon profile of the divested entity operates in the direction predicted by environmental finance theory, though statistical significance is marginal.}},
author = {{Brodin, Marcus and Dolk Persson, Sebastian}},
language = {{eng}},
note = {{Student Paper}},
title = {{To Spin or Not to Spin? Carbon Exposure and Parent Firm Credit Risk after Spin-Offs}},
year = {{2026}},
}