Asset Sales by Manufacturing Firms in India

Posted: 10 May 2010

See all articles by Vikash Gautam

Vikash Gautam

Indira Gandhi Institute of Development Research (IGIDR)

Date Written: May 6, 2010

Abstract

In this paper we study 325 large scale asset sale transactions by Indian manufacturing firms in the period 1996 to 2008. We find that the likelihood of asset sales increases with the firm’s low capacity of debt utilisation and decreases with size, profitability, operating performance and solvency. We also find that the performance of firms after they sell assets do not improve in profitability, solvency or operations but the only difference the episodes of asset sales make is some reduction in leverage. We contrast with the existing episodes of asset sales in developed countries as the performance of firms there, after they sell assets, improves in all parameters. Validating such a contrast, this paper argues that the problems with the manufacturing firms in India are structural in nature.

Keywords: Asset sales, Focus, Low capacity of debt utilization, Size, Profitability, Operating performance, Solvency, Leverage

JEL Classification: D21, G31, G32, G33

Suggested Citation

Gautam, Vikash, Asset Sales by Manufacturing Firms in India (May 6, 2010). Available at SSRN: https://ssrn.com/abstract=1601251

Vikash Gautam (Contact Author)

Indira Gandhi Institute of Development Research (IGIDR) ( email )

Gen A.K. Vaidya Marg Santoshnagar
Goregaon (East)
Mumbai, Maharashtra 400065
India

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