Project Management

Fire Sales In Finance And Macroeconomics

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Executive Summary

Fire sales are forced sales of assets in which high-valuation bidders are sidelined, typically due to debt overhang problems afflicting many specialist bidders simultaneously. The authors overview theoretical and empirical research on asset fire sales, which shows how they can arise, how they can lead to asset under-valuations, how contracts and bankruptcy regimes adjust to the risk of fire sales, how fire sales can lead to downward spirals or cascades in asset prices, how arbitrage fails in the presence of fire sales, and how fire sales can reduce productive investment.

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