The bright side of fire sales
Journal
Review of Financial Studies
Subject
Finance
Publishing details
Authors / Editors
Meier J-M;Servaes H
Biographies
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
