Asset sales and firm strategy

an analysis of divestitures by UK companies

Research output: Contribution to journalArticle

16 Citations (Scopus)

Abstract

This paper examines the financial causes and consequences of the decision to sell-off non-financial assets as part of a new or ongoing restructuring programme by UK non-financial companies between 1993 and 2000. We report that asset sales follow a period of declining operating returns and tend to occur in diversified companies with high levels of financial leverage. Stock prices respond positively to asset sale announcements. This arises due to improvements in operating returns and a decline in financial leverage and corporate diversification subsequent to the disposal. Our findings suggest that asset sales represent an effective operational response to a firm's poor financial condition. However, we also find that a manager's decision to sell assets is strongly influenced by the explicit threats to their control from lenders and competition from product, labour and takeover markets.
Original languageEnglish
Pages (from-to)71-87
Number of pages17
JournalEuropean Journal of Finance
Volume15
Issue number1
DOIs
Publication statusPublished - Jan 2009

Fingerprint

Assets
Sales strategies
Firm strategy
Asset sales
Divestitures
Corporate diversification
Financial condition
Disposal
Stock prices
Threat
Managers
Financial leverage
Labor

Keywords

  • asset sales
  • corporate restructuring
  • firm strategy
  • managerial discipline
  • operating performance

Cite this

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Asset sales and firm strategy : an analysis of divestitures by UK companies. / Hillier, D.J.; McColgan, P.; Wereman, S.

In: European Journal of Finance, Vol. 15, No. 1, 01.2009, p. 71-87.

Research output: Contribution to journalArticle

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