Asset Specificity of Non-Financial Firms

Amir Kermani and Yueran Ma

No 27642, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The specificity of firms' assets affects a wide range of economic issues. We study asset specificity of U.S. non-financial firms using a new dataset on the liquidation recovery rates of all major asset categories across industries. First, we find that non-financial firms' assets are generally highly specific. The average recovery rate (liquidation value over cost net of depreciation) is 35% for plant, property, and equipment (PPE). Second, across industries, physical attributes such as mobility, durability, and standardization account for around 40% of variations in PPE recovery rates. Over time, macroeconomic and industry conditions have the most impact on recovery rates when PPE is not firm-specific. Third, higher asset specificity is associated with less asset sales, greater investment response to uncertainty, and more Q dispersion, consistent with theories of investment irreversibility. Finally, the data suggests that rising intangibles have had a limited impact on firms' liquidation values.

JEL-codes: E22 E32 G31 G33 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-cfn and nep-mac
Note: CF EFG ME
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Citations: View citations in EconPapers (11)

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