Do Asset Fire Sales Exist? An Empirical Investigation of Commercial Aircraft Transactions

Pulvino, Todd

doi:10.1111/0022-1082.00040

Cited by 587 publications

(285 citation statements)

References 49 publications

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“…The difference between the current market price of the security and the price at which it is sold is called the "haircut" in the repo. 19 There is strong empirical support for the idea of asset specificity in the corporate-finance literature, as shown, for example, by Pulvino (1998) for the airline industry, and by Acharya, Bharath, and Srinivasan (2006) for the entire universe of defaulted firms in the US over the period 1981 to 1999 (see also Berger, Ofek, andSwary, 1996, andStromberg, 2000). 20 We observe a similar effect of ∆ on banks' choice of liquidity as before.…”

Section: Proof Of Propositionsupporting

confidence: 57%

Crisis Resolution and Bank Liquidity

Acharya¹,

Shin²,

Yorulmazer³

2010

Rev. Financ. Stud.

225

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What is the effect of financial crises and their resolution on banks' choice of liquidity?When banks have relative expertise in employing risky assets, the market for these assets clears only at fire-sale prices following a large number of bank failures. The gains from acquiring assets at fire-sale prices make it attractive for banks to hold liquid assets. The resulting choice of bank liquidity is counter-cyclical, inefficiently low during economic booms but excessively high during crises. We present evidence consistent with these predictions.While interventions to resolve banking crises may be desirable ex post, they affect bank liquidity in subtle ways: liquidity support to failed banks or unconditional support to surviving banks reduces incentives to hold liquidity, whereas support to surviving banks conditional on their liquid asset holdings has the opposite effect.J.E.L. Classification: G21, G28, G32, E58, D61

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Section: Proof Of Propositionsupporting

confidence: 57%

Crisis Resolution and Bank Liquidity

Acharya¹,

Shin²,

Yorulmazer³

2010

Rev. Financ. Stud.

225

View full text Add to dashboard Cite

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“…Empirical support in favor of this idea has been provided by Pulvino (1998) for the airline industry, and especially by Acharya, Bharath, and Srinivasan (2007) who look at the entire universe of defaulted firms in the US over the period 1981 to 1999; see also Berger, Ofek, and Swary (1996) and Stromberg (2000). We adopt the definition of asset specificity that has been employed in the latter three papers: asset specificity is measured by the Book Value of Machinery and Equipment divided by the Book Value of Assets.…”

Section: Empirical Analysismentioning

confidence: 99%

Cross-country variations in capital structures: The role of bankruptcy codes

Acharya

Sundaram

John

2011

Journal of Financial Intermediation

114

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We investigate the impact of bankruptcy codes on firms' capital-structure choices. We develop a theoretical model to identify how firm characteristics may interact with the bankruptcy code in determining optimal capital structures. A novel and sharp empirical implication emerges from this model: that the difference in leverage choices under a relatively equity-friendly bankruptcy code (such as the US's) and one that is relatively more debt-friendly (such as the UK's) should be a decreasing function of the anticipated liquidation value of the firm's assets. Using data on the US and the UK over the period 1990 to 2002, we subject this prediction to both parametric and nonparametric tests, using different proxies for liquidation values and different measures of leverage. In support for the theory, we find that our proxies for liquidation value are both statistically and economically significant in explaining leverage differences across the two countries. In contrast, many of the other factors that are known to affect within-country leverage (e.g., size) cannot explain differences in leverage across countries.

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“…These are firm size, diversification measures, the market-to-book ratio of assets, dividend policy, concentration of ownership, the existence of a credit rating and debt and liquidity ratios. Pulvino (1998) argues that it is uncertain if a highly levered but also highly liquid firm is financially constrained. Similarly, no unambiguous inference can be drawn for a firm with little debt but also low liquidity.…”

Section: Compustatmentioning

confidence: 99%

Do Firms Use Derivatives to Reduce their Dependence on External Capital Markets?

Adam

2002

Review of Finance

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Abstract. This study investigates if the use of derivatives by corporations is likely to affect their financing strategies. I find a strong positive relation between the minimum revenue guaranteed by hedging and investment expenditures. This result implies that hedging increases the likelihood that investments can be financed internally. I also find that firms tend to finance their investment expenditures externally rather than internally. If external capital is more costly than internal capital it would clearly be in a firm's interest to reduce its dependence on external capital. Consistent with this result, I find that the median firm that does not hedge finances 100% of its investment expenditures externally, while the median firm that hedges finances only 86% of investments externally.

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Do Asset Fire Sales Exist? An Empirical Investigation of Commercial Aircraft Transactions

Cited by 587 publications

References 49 publications

Crisis Resolution and Bank Liquidity

Crisis Resolution and Bank Liquidity

Cross-country variations in capital structures: The role of bankruptcy codes

Do Firms Use Derivatives to Reduce their Dependence on External Capital Markets?

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