Asset Sales, Firm Performance, and the Agency Costs of Managerial Discretion

Larry Lang, Annette Poulsen and René Stulz

No 4654, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We argue that management sells assets when doing so provides the cheapest funds to pursue its objectives rather than for operating efficiency reasons alone. This hypothesis suggests that (1) firms selling assets have high leverage and/or poor performance, (2) a successful asset sale is good news and (3) the stock market discounts asset sale proceeds retained by the selling firm. In support of this hypothesis, we find that the typical firm in our sample performs poorly before the sale and that the average stock-price reaction to asset sales is positive only when the proceeds are paid out.

Date: 1994-02
Note: AP CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published as Journal of Financial Economics, 1995, pp. 3-38

Downloads: (external link)
http://www.nber.org/papers/w4654.pdf (application/pdf)

Related works:
Journal Article: Asset sales, firm performance, and the agency costs of managerial discretion (1995)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:4654

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w4654

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().