סמינר במימון חשבונאות

Quality and productivity in aircraft sales: why fire sale discounts are overstated

Abstract: The paper decomposes the raw fire sale discount on the sales of aircraft by distressed airlines into three components: (i) quality impairment due to under-maintenance, (ii) misallocation to lower productivity users, and (iii) a liquidity component due to the immediacy of the sale. We find that about one half of the fire sale discount is driven by quality differences between distressed sales and regular sales. The discount for quality varies with the length and depth of distress, and is higher for aircraft sales in Chapter 7 than in Chapter 11. Once we adjust for quality the fire sale discount is similar across the two procedures. We find no evidence for the misallocation of assets in fire sales to lower productivity users and industry outsiders. This may reflect the efficiency of the Chapter 11 process, that allows for a more patient sale of the assets. The results suggest that the welfare costs associated with fire sales might be significantly lower than those documented in prior studies. ​