Download This PaperThe Bright Side of Fire Sales
AFA 2015 Boston Meetings Paper
European Corporate Governance Institute (ECGI) - Finance Working Paper No. 435/2014
EFA 2016 Oslo Meetings Paper
Review of Financial Studies
68 Pages Posted: 30 Jul 2014 Last revised: 2 Apr 2020
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The Bright Side of Fire Sales
Date Written: October 12, 2018
Abstract
Firms that buy assets in fire sales earn excess returns that are two percentage points higher than in regular acquisitions. The mechanism behind this result is the reduced bargaining power of the seller. We find no difference in real effects or in the combined returns for buyers and sellers between fire sales and regular acquisitions, suggesting that the quality of the match is similar in both types of transactions. The externalities of fire sales for other stakeholders are limited. These results indicate that the welfare losses associated with fire sales are smaller than previously thought.
Keywords: Fire Sales, Mergers and Acquisitions, Distress, Bankruptcy, Restructuring, Bailouts
JEL Classification: G14, G32, G33, G34, G38, H81
Suggested Citation: Suggested Citation
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