Market reactions to asset sales:: Effects of the Joint Venture Prerequisite

SummaryWe analyze the strategic issue of inter-firm resource transfer – i.e., the methods firms use to buy and sell assets. We introduce a typology of asset sale mechanisms delineated by levels of information uncertainty. We analyze this typology, by exploring how firms choose among the mechanisms and by exploring how they are rewarded by the financial markets for their choices. We find that factors involving the level of information asymmetry, the firm’s bargaining power, the firm’s current opportunities and pressures, and the firm’s ability to engage in the various mechanisms, all correlate with both choices and rewards.