Amir Kermani, Professor, UC Berkeley
Abstract: We study asset specificity of US non-financial firms using a new dataset on the liquidation recovery rates of all major asset categories across industries. First, we find a high average level of asset specificity. Second, across industries, physical attributes of assets account for substantial variations in liquidation recovery rates. Over time, macroeconomic and industry conditions have the most impact when assets are not firm-specific. Third, higher asset specificity is associated with less disinvestment, greater investment response to uncertainty, and more Q dispersion, consistent with theories of investment irreversibility. Finally, rising intangibles have had a limited impact on firms’ liquidation values.