Asset Sales, Firm Performance, and the Agency Costs of Managerial Discretion

  title={Asset Sales, Firm Performance, and the Agency Costs of Managerial Discretion},
  author={Annette B. Poulsen and L. Lang and Ren{\'e} M. Stulz},
  • Annette B. Poulsen, L. Lang, René M. Stulz
  • Published 1994
  • Business
  • We argue that management sells assets when doing so provides the cheapest funds to pursue its objectives rather than for operating efficiency reasons alone. This hypothesis suggests that (1) firms selling assets have high leverage and/or poor performance, (2) a successful asset sale is good news and (3) the stock market discounts asset sale proceeds retained by the selling firm. In support of this hypothesis, we find that the typical firm in our sample performs poorly before the sale and that… CONTINUE READING
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