Asset Sales, Method of Payment in M&As, and their Value Effects

46 Pages Posted: 10 Mar 2022 Last revised: 26 Mar 2024

See all articles by Christos Mavrovitis (Mavis)

Christos Mavrovitis (Mavis)

University of Surrey - Surrey Business School

Nathan McNamee

Southern Utah University

Nickolaos G. Travlos

ALBA Graduate Business School; University of Surrey

Date Written: March 16, 2024

Abstract

In line with increased liquidity offered by asset sales, our findings show that firms selling assets are more likely to subsequently conduct cash acquisitions. Additionally, we find that in subsequent cash acquisitions firms using cash stemming from asset sales experience higher announcement abnormal returns compared to firms using cash from other sources of funds such as internally generated cash flows, debt financing, and equity issuance which are linked to agency costs and information asymmetry effects. The higher wealth effects suggest that funds from asset sales are inflicted with relatively lower adverse valuation effects that are associated with other sources of funds.

Keywords: Abnormal Returns, acquisitions, asset sales, method of payment

JEL Classification: G14, G32, G34

Suggested Citation

Mavrovitis (Mavis), Christos and McNamee, Nathan and Travlos, Nickolaos G. and Travlos, Nickolaos G., Asset Sales, Method of Payment in M&As, and their Value Effects (March 16, 2024). Available at SSRN: https://ssrn.com/abstract=2703462 or http://dx.doi.org/10.2139/ssrn.2703462

Christos Mavrovitis (Mavis) (Contact Author)

University of Surrey - Surrey Business School ( email )

Guildford, Surrey GU2 7XH
United Kingdom

HOME PAGE: http://www.surrey.ac.uk/people/christos-p-mavis

Nathan McNamee

Southern Utah University ( email )

351 West Center Street
Cedar City, UT 84720
United States
+1 (435) 865-8278 (Phone)

Nickolaos G. Travlos

ALBA Graduate Business School ( email )

Athinas Ave. & 2A Areos Str.
Vouliagmeni 166 71, Athens
Greece

HOME PAGE: http://www.alba.edu.gr

University of Surrey ( email )

Guildford
Guildford, Surrey GU2 5XH
United Kingdom

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