Analysis of Motives of Selling Company Assets

The paper analyses the motives of selling company assets. The evidence is provided that corporate managers undertake asset sales because of poor performance, high levels of financial leverage, and excessive diversification. It is also apparent that companies may have been forced to sell assets owing to pressure from lenders, and from external corporate markets. It is also provided that the market reacts positively to announcements of asset sales. Thus, asset sales create wealth for shareholders. Finally, the market also reacts positively to announcements of firms which state that they are using the proceeds from asset sale to service debt, apparently to avoid bankruptcy costs.