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- Title
Size of Financing Need and the Choice between Asset Sales and Security Issuances.
- Authors
Desai, Chintal A.; Gupta, Manu
- Abstract
We study the effect of the size of financing need on a firm's choice between selling assets and issuing securities to finance its investments. The balance sheet effect predicts that a firm prefers to sell assets when the financing need is relatively small as there is less information asymmetry regarding the value of a (small) subset of its assets. When the financing need is large, a firm prefers issuing securities to selling assets. We find evidence supporting the prediction. Our findings remain unchanged when we employ measures of financing need that are relatively independent of the actual amount of financing raised.
- Subjects
CORPORATE finance; FINANCIAL management; SECURITIES; EXPENSE forecasting; ASSET management
- Publication
Financial Management (Wiley-Blackwell), 2019, Vol 48, Issue 2, p677
- ISSN
0046-3892
- Publication type
Article
- DOI
10.1111/fima.12242