Value creation in corporate asset sales: The role of managerial, performance and lender monitoring

Examining stockholder and bondholder wealth of acquirers and sellers, we find that asset sales are firm value enhancing for the seller but value neutral, for the acquirer. Although divestitures are typically viewed as more synergistic and friendly transactions than takeovers, we find using a matched acquirer-seller sample, that the net wealth effect from the transaction is not significantly different from zero. However, those transactions that involve high-q bidders and low-q sellers create maximum value for acquirers and for the transaction as a whole. Further, low-q bidder/low-q seller transactions are value destroying. We find that seller gains are only related to the seller's managerial performance. We document that private lender monitoring enhances transactional value in corporate divestitures. Collectively, the analysis shows that well-managed and highly monitored firms are more likely to benefit from asset sale transactions. (C) 2002 Elsevier Science B.V. All rights reserved.