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The benefits of buying distressed assets

Journal

Journal of Applied Corporate Finance

Subject

Finance

Publishing details

Journal of Applied Corporate Finance 2020 Vol 32:4 p 105-116

Authors / Editors

Meier J-M;Servaes H

Biographies

Henri Servaes

Publication Year

2020

Abstract

When companies in financial difficulty are forced to sell assets—especially real assets such as factories, business units, real estate, or the entire company—the news is often seen as negative all around. In these situations, referred to as “fire sales,” companies are forced to sell assets below fair value, and the spillover effects can be costly as well. These spillover costs, or “externalities,” include plant closings and job losses that hurt employees, suppliers, and customers. Fire sales can also depress the values of the assets of healthy companies in the same industry.

Available on ECCH

No


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