Liquidation, fire sales, and acquirers' private information

Material type: 文書・図像類

Author: Nishihara, Michiほか

Publisher: Graduate School of Economics and Osaka School of International Public Policy (OSIPP), Osaka University

Publication date: 2018-08

Material Format: Paper

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Note (General)：: We develop a dynamic model in which a distressed firm optimizes an exit choice between sell-out and default as well as its timing. We assume that the ...

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Paper

Material Type: 文書・図像類
Title: Liquidation, fire sales, and acquirers' private information
Author/Editor: Nishihara, Michi
Shibata, Takashi
Author Heading: Nishihara, Michi
https://nrid.nii.ac.jp/nrid/1000020456940
Shibata, Takashi
https://nrid.nii.ac.jp/nrid/1000070372597
Publication, Distribution, etc.: Graduate School of Economics and Osaka School of International Public Policy (OSIPP), Osaka University
Publication Date: 2018-08
Publication Date (W3CDTF): 2018-08
Periodical title: Discussion Papers In Economics And Business
No. or year of volume/issue: 18-25
Volume: 18-25
Pages: 1-42
Text Language Code: eng
Subject Heading: real options
screening game
re sale
M&A
intertemporal price discrimination
Target Audience: 一般
Note (General): We develop a dynamic model in which a distressed firm optimizes an exit choice between sell-out and default as well as its timing. We assume that the distressed firm is not informed about the acquirer's asset valuation. We show that the firm delays liquidation to decrease the acquirer's information rent. Notably, the firm can change the exit choice from sell-out to default when the screening cost is high. In this case, shareholders declare default regardless of the acquirer's valuation, which provides the acquirer the maximum information rent. Together with bankruptcy costs, the maximal information rent lowers the sales price and debt recovery. This mechanism can explain many empirical findings about fire sales and acquirers' excess gains. Higher volatility, leverage, and asymmetric information increase the likelihood of a fire sale, but higher bankruptcy costs could play a positive role in preventing a fire sale. With asymmetric information, the firm can reduce debt issuance to avoid the risk of a fire sale.
Periodical Title (NCID): AA1160366X
https://ci.nii.ac.jp/ncid/AA1160366X
References (URI): URI
http://www2.econ.osaka-u.ac.jp/library/global/dp/1825.pdf
Data Provider (Database): 国立情報学研究所 : 学術機関リポジトリデータベース（IRDB）（機関リポジトリ）
https://irdb.nii.ac.jp
Original Data Provider (Database): 大阪大学 : 大阪大学学術情報庫　桜華