Do Asset Fire-Sales Exist?: An Empirical Investigation of Commercial Aircraft Transactions
Posted: 19 Jul 1998
Date Written: Undated
This paper uses commercial aircraft transactions that occurred between 1978 and 1991 to determine whether capital constraints cause firms to liquidate assets at discounts to fundamental values. Results indicate that airlines most likely to be facing capital constraints receive lower prices than their unconstrained rivals when selling used narrow-body aircraft. Further evidence that capital constraints affect liquidation prices is provided by airlines' asset acquisition activity. Unconstrained airlines significantly increase buying activity when prices are depressed; this pattern is not observed for financially constrained airlines. These results have implications for investment and capital structure theories, as well as policy implications for bankruptcy law reform.
JEL Classification: G31, G32, G33, L93
Suggested Citation: Suggested Citation