Do Asset Fire Sales Exist? An Empirical Investigation of Commercial Aircraft Transactions


  • Todd C. Pulvino

    1. Kellogg Graduate School of Management, Northwestern University
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    • Assistant Professor of Finance, Kellogg Graduate School of Management, Northwestern University. This research has benefited substantially from the comments of an anonymous referee, Chris Avery, George Baker, Richard Caves, Tim Conley, Tony Davila, Robert Kennedy, Kentaro Koga, Josh Lerner, Tim Opler, Megan Partch, Andrei Shleifer, René Stulz, and seminar participants at the University of Chicago, Dartmouth University, Duke University, Harvard University, the University of Illinois, M.I.T., the University of North Carolina, Northwestern University, the University of Oregon, the University of Rochester, the Wharton School, and the University of Wisconsin. I would like to thank Howard Chickering and Steve O'Neil of R.V.I. Services, Mort Beyer of Mort Beyer Associates, Ken Raff of American Airlines, Carl Rings of Northwest Airlines, and Steven Gibbs of the FAA for useful discussions, and Chris Allen for assistance with data collection. Financial support from the Harvard Business School Division of Research is gratefully acknowledged.


This paper uses commercial aircraft transactions to determine whether capital constraints cause firms to liquidate assets at discounts to fundamental values. Results indicate that financially constrained airlines receive lower prices than their unconstrained rivals when selling used narrow-body aircraft. Capital constrained airlines are also more likely to sell used aircraft to industry outsiders, especially during market downturns. Further evidence that capital constraints affect liquidation prices is provided by airlines' asset acquisition activity. Unconstrained airlines significantly increase buying activity when aircraft prices are depressed; this pattern is not observed for financially constrained airlines.