The Bright Side of Fire Sales

AFA 2015 Boston Meetings Paper

ECGI - Finance Working Paper No. 435/2014

EFA 2016 Oslo Meetings Paper

62 Pages Posted: 30 Jul 2014 Last revised: 14 Oct 2018

Jean-Marie A. Meier

University of Texas at Dallas

Henri Servaes

London Business School; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: October 12, 2018


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

Meier, Jean-Marie A. and Servaes, Henri, The Bright Side of Fire Sales (October 12, 2018). AFA 2015 Boston Meetings Paper; ECGI - Finance Working Paper No. 435/2014; EFA 2016 Oslo Meetings Paper. Available at SSRN: or

Jean-Marie A. Meier (Contact Author)

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States


Henri Servaes

London Business School ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom
+44 20 7000 8268 (Phone)
+44 20 7000 8201 (Fax)


Centre for Economic Policy Research (CEPR)

United Kingdom

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