 Equity and Cash in Intercorporate Asset Sales: Theory and EvidenceUlrich Hege, Stefano Lovo, Myron Slovin and Marie Sushka Working Papers from HAL Abstract: 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. Buyer 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 seller, but not buyer, information in contrast to theoretical and empirical findings for mergers. The central prediction of our model is that there are relatively large gains in wealth for both buyers and sellers in equity-based asset sales, whereas cash asset sales generate significantly smaller gains that typically accrue only to sellers. Our empirical results are consistent with the predictions of our theoretical model. Keywords: Asset sales; means of payment; auctions; two-sided asymmetric information (search for similar items in EconPapers) Published in 2012 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-00759788 Access Statistics for this paper More papers in Working Papers from HAL |
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