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The bright side of fire sales

Journal

Review of Financial Studies

Subject

Finance

Publishing details

Review of Financial Studies 2019 Vol 32:11 p 4228-4270

Authors / Editors

Meier J-M;Servaes H

Biographies

Henri Servaes

Publication Year

2019

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.

Available on ECCH

No


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