Handbook of Corporate Finance Empirical Corporate Finance Volume 1

468 V. Maksimovic and G. Phillips
Ta b l e 2 B

Sample of firms

Total Mergers and

takeovers

Asset sales

Full division Partial division

Transactions by aggregate economy conditions

Recession years (1981, 1982, 1991)

Average % reallocated

(total number)

3.57% (5,148) 2.16% (3,112) 0.70% (1,003) 0.72% (1,033)

Expansion years (1986, 1987, 1988)

Average % reallocated

(total number)

6.19% (8,989) 2.69% (3,904) 1.73% (2,509) 1.77% (2,576)

Indeterminate years 3.21% 1.73% 0.70% 0.78%

Transactions by industry capacity utilization

Low industry capacity utilization

(bottom quartile)

Average % reallocated

(total number)

3.86% (8,618) 1.90% (4,244) 0.99% (2,210) 0.97% (2,164)

High industry capacity utilization

(top quartile)

Average % reallocated

(total number)

3.69% (8,413) 1.92% (4,375) 0.87% (1,977) 0.90% (2,061)

Transactions by long-run industry growth/decline

Quartile 1: Declining industry

growth

Average % reallocated

(total number)

4.01% (6,290) 1.95% (3,058) 1.09% (1,707) 0.97% (1,525)

Quartile 2

Average % reallocated

(total number)

3.86% (5,250) 1.96% (2,666) 1.05% (1,425) 0.85% (1,160)

Quartile 3

Average % reallocated

(total number)

3.52% (10,008) 1.80% (5,131) 0.88% (2,505) 0.83% (2,372)

Quartile 4: High industry

growth

Average % reallocated

(total number)

4.03% (15,746) 2.01% (7,870) 0.87% (3,405) 1.14% (4,471)

Source:Maksimovic and Phillips (2001), Journal of Finance.

On average, the good assets are kept and the assets that cannot be exploited efficiently
are sold. When the opportunity cost of retaining marginal assets is higher because other
segments are more productive and growing faster, the rate at which marginal assets are
disposed off is higher.