TY  - JOUR
AU  - Shleifer,Andrei
AU  - Vishny,Robert W.
TI  - Asset Sales and Debt Capacity
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3618
PY  - 1991
Y2  - February 1991
UR  - http://www.nber.org/papers/w3618
L1  - http://www.nber.org/papers/w3618.pdf
N1  - Author contact info:
Andrei Shleifer
Department of Economics
Harvard University
Littauer Center M-9
Cambridge, MA 02138
Tel: 617/495-5046
Fax: 617/496-1708
E-Mail: ashleifer@harvard.edu

Robert W. Vishny
Booth School of Business
The University of Chicago
5807 South Woodlawn Avenue
Chicago, IL  60637
Tel: 773/702-2522
Fax: 773/834-1920
E-Mail: Rvishny@gmail.com
AB  - In this paper, we explore the link between asset sales end debt capacity. Asset sales are a common way far firms to raise cash, and so present an alternative to security issues for firms near financial distress. We argue that liquid assets -- those that can be resold at attractive terms -- are good candidates for debt finance because financial distress for firms with such assets is relatively inexpensive. We apply this logic to explain variation in debt capacity across industries and over the business cycle, as well as to the rise in U.S. corporate leverage in the 1980s.
ER  -