Why Do Managers Announce the Intention to Sell Assets?

Nearly one-third of asset sale announcements are preceded by a public statement of intent to sell. These voluntary disclosures generate significant average returns of 1.1% and bias returns around actual asset sales towards zero. Due to opportunistic managerial behavior, preannouncements occur after poor stock performance and CEO turnover. Managers also opportunistically vest options around the preannouncements and benefit from the uptick in stock prices. Investors account for this, as returns on these announcements are 2.9 percentage points lower. Size and leverage explain preannouncement returns, whereas returns on deals without preannouncements have different explanations, such as past returns