Asset Sales, Operating Performance and Firm Strategy: An Empirical Analysis

Abstract

This paper examines the operating performance of UK firms following a decision to sell off non-financial assets as part of a new or ongoing restructuring program. We report that asset sales normally follow a sustained period of poor operating performance, and tend to occur in well-diversified firms with high levels of financial leverage. In general, asset sales lead to a significant improvement in firm operating performance. Our findings suggest that, for the UK at least, managers sell assets in response to discipline from lender monitoring, product markets and markets for managerial labour.

Keywords: Asset Sales, Corporate Restructuring, Firm Strategy, Operating Performance

JEL Classification: G32, G34, M41