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Financing Asset Sales and Business Cycles

Marc Arnold, Dirk Hackbarth and Tatjana XENIA Puhan
Additional contact information
Marc Arnold: University of St. Gallen
Tatjana XENIA Puhan: University of Zurich and Swiss Finance Institute

No 14-11, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Using a dynamic model of financing, investment, and macroeconomic risk, we investigate when firms sell assets to fund investments (financing asset sales) across the business cycle. The model reveals that financing asset sales entail a lower wealth transfer from equity to debt than otherwise identical but equity financed investments. Exploring the dynamics of this motive across business cycles helps explain novel stylized facts about asset sales and their business cycle patterns that cannot be rationalized by traditional motives for selling assets.

Keywords: Asset Sales; Wealth Transfer Problem; Leverage; Business Cycles; Real Options (search for similar items in EconPapers)
JEL-codes: D92 E32 E44 G12 G32 G33 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2014-01
New Economics Papers: this item is included in nep-mac
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http://ssrn.com/abstract=2356377 (application/pdf)

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Working Paper: Financing Asset Sales and Business Cycles (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1411

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