Corporate Fire Sales

Serdar Dinc, Isil Erel and Rose Liao
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Serdar Dinc: Rutgers University
Isil Erel: OH State University
Rose Liao: Rutgers University

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: Existing empirical studies estimate the impact of fire sales either without the benefit of market prices from frequent trades, as with aircraft sales, or without observing the prices received by distressed sellers, as with the sales of equity securities by mutual funds facing outflows. We study the corporate sale of minority equity stakes in publicly listed firms where market prices from frequent trades are available and the transaction share prices received by the vendors are reported. We estimate the distressed sale discount based on the four-week premium to be in the range of 15-19% for smaller stakes, with significantly higher discounts for larger stakes sold. Our results are robust to many target-, vendor-, and acquirer-level controls and alternative classifications.

Date: 2014-09
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2014-13

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