Asset sales and firm strategy: an analysis of divestitures by UK companies
Abstract
This paper examines the financial causes and consequences of the decision to sell-off non-financial assets as part of a new or ongoing restructuring programme by UK non-financial companies between 1993 and 2000. We report that asset sales follow a period of declining operating returns and tend to occur in diversified companies with high levels of financial leverage. Stock prices respond positively to asset sale announcements. This arises due to improvements in operating returns and a decline in financial leverage and corporate diversification subsequent to the disposal. Our findings suggest that asset sales represent an effective operational response to a firm's poor financial condition. However, we also find that a manager's decision to sell assets is strongly influenced by the explicit threats to their control from lenders and competition from product, labour and takeover markets.Download Info
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Bibliographic Info
Article provided by Taylor and Francis Journals in its journal The European Journal of Finance.
Volume (Year): 15 (2009)
Issue (Month): 1 ()
Pages: 71-87
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Related research
Keywords: asset sales; corporate restructuring; firm strategy; managerial discipline; operating performance;References
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Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Jackson, Scott B. & Rodgers, Theodore C. & Tuttle, Brad, 2010. "The effect of depreciation method choice on asset selling prices," Accounting, Organizations and Society, Elsevier, vol. 35(8), pages 757-774, November.
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