All firms need capital. Much research addresses the choice between issuing various types of securities – for example, between issuing debt and equity. However, another method of financing has received relatively little attention – selling non-core assets, such as property, divisions, or financial investments. This article explains the conditions under which an asset sale is the preferred means of raising capital, and highlights how a manager should go about deciding between selling assets and issuing securities.
Alex Edmans, William Mann, Saturday, February 15, 2014 - 00:00
James Choi, Hongjun Yan, Friday, January 25, 2013 - 00:00
Security-market regulations often seek to ensure that all investors have equal access to information about each company. But what are the actual costs of an unequal information playing field? This column reviews evidence from China, Finland, and the US, suggesting that information asymmetry raises companies’ cost of capital. This inhibits investment and thereby long-run economic growth.