Asset Specificity of Non-Financial Firms / Amir Kermani, Yueran Ma.

Format:

Book

Author/Creator:

Kermani, Amir.

Contributor:

National Bureau of Economic Research.

Ma, Yueran.

Series:

Working Paper Series (National Bureau of Economic Research) no. w27642.

NBER working paper series no. w27642

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

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.

Notes:

Print version record

August 2020.