Lee, Younjung and Han, Tian (2023) The fire sale enigma: revealing long-term benefits of divestiture amid financial turmoil. In: The Fire Sale Enigma: Revealing Long-term Benefits of Divestiture Amid Financial Turmoil. 8th - 9th September 2023. Montpellier Business School, France. Montpellier Business School, International Conference in Finance Banking and Accounting. (In Press)

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Abstract

This study examines the impact of divestiture on financially distressed firms during the 2008 global financial crisis, with a focus on its role in promoting long-term performance recovery. In contrast to the prevailing fire sale theory, which posits that divestiture in periods of economic crisis leads to value destruction, our results reveal a positive association between divesting firms and their long-term performance recovery. Over a 3-year post-divestiture period, firms significantly improve their long-term operating performance compared to non-divesting benchmarks, by easing financial constraints and maintaining pre-crisis investment levels. Moreover, firms with divestiture outperform those using other restructuring strategies that prioritize short-term cash flow enhancements and cost-cutting measures. Our findings provide valuable insights into the long-term implications of corporate divestiture during economic downturns.

Item Type:	Conference Proceedings
Title of Proceedings:	The Fire Sale Enigma: Revealing Long-term Benefits of Divestiture Amid Financial Turmoil. 8th - 9th September 2023. Montpellier Business School, France.
Uncontrolled Keywords:	divestiture; financial distress; economic crises; fire sale
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HC Economic History and Conditions
Faculty / School / Research Centre / Research Group:	Faculty of Business Faculty of Business > Department of Accounting & Finance
Related URLs:	Organisation
Last Modified:	26 May 2023 10:46
URI:	http://gala.gre.ac.uk/id/eprint/42718

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