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Asset Liquidity and the Determinants of Asset Sales by Poorly Performing Firms

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  • Timothy A. Kruse
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    Abstract

    This study analyzes factors that potentially are associated with higher incidences of asset sales by poorly performing firms. Consistent with Shleifer and Vishny’s (1992) asset liquidity model, I find that firms are more likely to sell assets if their industry’s growth rate is higher. The relation is stronger among firms less likely to suffer from a lack of flexibility arising from poor financial health. Firms also are more likely to sell assets if they are suffering from low debt capacity, experiencing the nonroutine turnover of its top officer, or have made acquisitions prior to their performance decline.

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    Bibliographic Info

    Article provided by Financial Management Association in its journal Financial Management.

    Volume (Year): 31 (2002)
    Issue (Month): 4 (Winter)
    Pages:

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    Handle: RePEc:fma:fmanag:kruse02

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    Cited by:
    1. Richard J. Arend, 2008. "Differences in RBV strategic factors and the need to consider opposing factors in turnaround outcomes," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 29(4), pages 337-355.
    2. Officer, Micah S., 2007. "The price of corporate liquidity: Acquisition discounts for unlisted targets," Journal of Financial Economics, Elsevier, vol. 83(3), pages 571-598, March.
    3. Shin, G. Hwan, 2008. "The profitability of asset sales as an explanation of asset divestitures," Pacific-Basin Finance Journal, Elsevier, vol. 16(5), pages 555-571, November.
    4. Alain Praet, 2011. "Voluntary firm restructuring: why do firms sell or liquidate their subsidiaries?," Annals of Finance, Springer, vol. 7(4), pages 449-476, November.
    5. Canina, Linda & Carvell, Steven A. & Ma, Qingzhong & Ukhov, Andrey D., 2013. "Business cycle and asset valuation in the gaming industry," Journal of Business Research, Elsevier, vol. 66(9), pages 1689-1695.

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