Selling to buy: Asset sales and acquisitions |
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| Affiliation: | 1. Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW, Washington, DC 20551, USA;2. Federal Reserve Bank of New York and Nova School of Business and Economics, 33 Liberty Street, New York, NY 10045, USA;3. Amherst Securities Group, 5001 Plaza On The Lake, Austin, TX 78746, USA;1. Otto-von-Guericke University Magdeburg, Germany;2. Halle Institute for Economic Research (IWH), Germany;3. Goethe University Frankfurt and Research Center SAFE, Germany;4. Utrecht University School of Economics, Netherlands |
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| Abstract: | This study explores the impact of joint corporate asset restructuring decisions, where firms sell an asset in order to fund a subsequent acquisition (selling-to-buy). We find that firms with asset sales are associated with increased acquisition probability. The effect is more pronounced for financially constrained firms. We also show that, in addition to the established improved firm efficiency from focus-increasing asset sales, financially constrained firms obtain the necessary funds to conduct focus-increasing acquisitions, improving further their efficiency. This translates into both higher long-run operating performance and stock abnormal returns at the asset sale announcement. |
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