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Do Asset Fire Sales Exist? An Empirical Investigation of Commercial Aircraft Transactions

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  • Todd C. Pulvino

    (Kellogg Graduate School of Management, Northwestern University)

Abstract

This paper uses commercial aircraft transactions to determine whether capital constraints cause firms to liquidate assets at discounts to fundamental values. Results indicate that financially constrained airlines receive lower prices than their unconstrained rivals when selling used narrow-body aircraft. Capital constrained airlines are also more likely to sell used aircraft to industry outsiders, especially during market downturns. Further evidence that capital constraints affect liquidation prices is provided by airlines' asset acquisition activity. Unconstrained airlines significantly increase buying activity when aircraft prices are depressed; this pattern is not observed for financially constrained airlines. Copyright The American Finance Association 1998.

Suggested Citation

  • Todd C. Pulvino, 1998. "Do Asset Fire Sales Exist? An Empirical Investigation of Commercial Aircraft Transactions," Journal of Finance, American Finance Association, vol. 53(3), pages 939-978, June.
  • Handle: RePEc:bla:jfinan:v:53:y:1998:i:3:p:939-978
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