Equity and Cash in Intercorporate Asset Sales: Theory and Evidence
Ulrich Hege (),
Myron B. Slovin and
Marie E. Sushka
Review of Financial Studies, 2009, vol. 22, issue 2, 681-714
We develop a two-sided asymmetric information model of asset sales that incorporates the key differences from mergers and allows the information held by each party to be impounded in the transaction. The buyer's information is conveyed through a first-stage competitive auction. A seller with unfavorable information about the asset accepts the cash offer of the highest bidder. A seller with favorable information proposes a take-it-or-leave-it counteroffer that entails buyer equity. Thus, the cash-equity decision reflects the seller's but not the buyer's information in contrast to the theoretical and empirical findings for mergers. The central prediction of our model is that there are large gains in wealth for both buyers and sellers in equity-based asset sales, whereas cash sales generate significantly smaller gains that typically accrue only to sellers. Our empirical results are consistent with the predictions of our theoretical model. The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: firstname.lastname@example.org., Oxford University Press.
References: Add references at CitEc
Citations: View citations in EconPapers (16) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
Working Paper: Equity and Cash in Intercorporate Asset Sales: Theory and Evidence (2012)
Working Paper: Equity and Cash in Intercorporate Asset Sales: Theory and Evidence (2009)
Working Paper: Equity and cash in intercorporate asset sales: theory and evidence (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:oup:rfinst:v:22:y:2009:i:2:p:681-714
Ordering information: This journal article can be ordered from
Access Statistics for this article
Review of Financial Studies is currently edited by Maureen O'Hara
More articles in Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().