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| Author: | Hillier, D. McColgan, P. Werema, S. |
| Title: | Asset sales and firm strategy: An analysis of divestitures by UK companies |
| Journal: | European Journal of Finance
2009 : JAN/FEB, VOL. 15:1-2, p. 71-87 |
| Index terms: | finance corporate restructuring corporate strategy assets sales companies United Kingdom |
| Freeterms: | operating performance |
| Language: | eng |
| Abstract: | This paper explores the financial (here as: fin.) causes and consequences of the decision to sell-off non-fin. assets as part of a new or ongoing restructuring programme by U.K. non-fin. companies from 1993 to 2000. It is found that asset sales follow a period of declining operating returns and tend to occur in diversified companies with high levels of fin. leverage (as: f-l). Stock prices respond positively to asset sale announcements. This arises because of improvements in operating returns and a decline in f-l. and corporate diversification subsequent to the disposal. Asset sales are suggested to represent an effective operational response to a firm's poor fin. condition. A manager's decision to sell assets is found to be strongly influenced by the explicit threats to their control from lenders and competition from product, labour and takeover markets. |
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