Dynamic Asset Sales with a Feedback Effect

The Review of Financial Studies, Forthcoming. Doi.org/10.1093/rfs/hhz058

59 Pages Posted: 19 Sep 2014 Last revised: 7 Oct 2019

See all articles by Sivan Frenkel

Sivan Frenkel

Tel Aviv University - Coller School of Management

Date Written: May 26, 2019

Abstract

I analyze a dynamic model of over-the-counter asset sales in which a manager receives stock-sensitive compensation and a transaction conveys information about the firm's value. I examine how market response to an asset sale feeds back to the manager's decision on the timing and the price of the sale, and analyze the unique pattern of stock prices before and after the sale. The implications of bargaining power, inventories, gains from trade, and the introduction of a vesting period are discussed. The model sheds light on observed properties of corporate sell-offs, as well as explains market dry-ups during downturn periods.

Keywords: asset sales, information externalities, asset prices, information disclosure

JEL Classification: G12, G14, D82, C73

Suggested Citation

Frenkel, Sivan, Dynamic Asset Sales with a Feedback Effect (May 26, 2019). The Review of Financial Studies, Forthcoming. Doi.org/10.1093/rfs/hhz058, Available at SSRN: https://ssrn.com/abstract=2497473 or http://dx.doi.org/10.2139/ssrn.2497473

Sivan Frenkel (Contact Author)

Tel Aviv University - Coller School of Management ( email )

Tel Aviv
Israel

HOME PAGE: http://https://sites.google.com/site/sivanfrenkel/

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