The Operating Performance Following Corporate Asset Sales

This paper investigates the long-run operating performance following the firms' asset sales from 1990 to 2007 in Korea. More importantly, current paper examines the relevance of the focus hypothesis, the financing hypothesis, and the agency hypothesis to explain the asset sale decision. The results show that the operating performance is substantially worse than their matching firms in the three years after the sale. The results also show that there are no significant differences in operating performance among the firms' motives for the sale. We were unable to find support for the ability of the three hypotheses of predicting operating performance. These findings collectively suggest that the existing hypotheses play no role in explaining the pattern of operating performance in Korea.