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Liquidation Costs and Accounting Data

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  • Michael J. Alderson
  • Brian L. Betker

Abstract

We examine the relation between liquidation costs and proxies for those costs that have been used in prior capital structure studies. Liquidation costs in our sample have a strong negative relation to the fixed-to-total assets ratio, and a strong positive relation to the industry market-to-book assets ratio. The relation between liquidation costs and research and development expense is positive, but weak. The adjusted R-squared values of 10% to 20% indicate that much of the variation in liquidation costs is left unexplained by the accounting variables typically used to proxy these costs.

Suggested Citation

  • Michael J. Alderson & Brian L. Betker, 1996. "Liquidation Costs and Accounting Data," Financial Management, Financial Management Association, vol. 25(2), Summer.
    • Handle: RePEc:fma:fmanag:alderson96
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    1. Hanna Hottenrott & Bettina Peters, 2012. "Innovative Capability and Financing Constraints for Innovation: More Money, More Innovation?," The Review of Economics and Statistics, MIT Press, vol. 94(4), pages 1126-1142, November.
    2. Marcin Kedzior & Barbara Grabinska & Konrad Grabinski & Dorota Kedzior, 2020. "Capital Structure Choices in Technology Firms: Empirical Results from Polish Listed Companies," JRFM, MDPI, vol. 13(9), pages 1-20, September.
    3. Bettina Peters & Mark J. Roberts & Van Anh Vuong, 2017. "Dynamic R&D choice and the impact of the firm's financial strength," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 26(1-2), pages 134-149, February.
    4. Dirk Czarnitzki & Hanna Hottenrott, 2011. "R&D investment and financing constraints of small and medium-sized firms," Small Business Economics, Springer, vol. 36(1), pages 65-83, January.
    5. Bronwyn Hall, 2004. "The financing of research and development," Chapters, in: Anthony Bartzokas & Sunil Mani (ed.), Financial Systems, Corporate Investment in Innovation, and Venture Capital, chapter 2, Edward Elgar Publishing.
    6. Ghosh, Saibal, 2016. "Banker on board and innovative activity," Journal of Business Research, Elsevier, vol. 69(10), pages 4205-4214.
    7. Söhnke M. Bartram, 2017. "Corporate Postretirement Benefit Plans and Real Investment," Management Science, INFORMS, vol. 63(2), pages 355-383, February.
    8. Mo, Jianlei & Tu, Qiang & Wang, Jianing, 2023. "Carbon pricing and enterprise productivity-The role of price stabilization mechanism," Energy Economics, Elsevier, vol. 120(C).
    9. Casson, Peter D. & Martin, Roderick & Nisar, Tahir M., 2008. "The financing decisions of innovative firms," Research in International Business and Finance, Elsevier, vol. 22(2), pages 208-221, June.
    10. Mahlich, Jörg C. & Yurtoglu, Burcin, 2011. "Intangibles Kapital und Rentabilität in der Pharmaindustrie," Die Unternehmung - Swiss Journal of Business Research and Practice, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 65(1), pages 32-49.
    11. Georgios Efthyvoulou & Priit Vahter, 2016. "Financial Constraints, Innovation Performance and Sectoral Disaggregation," Manchester School, University of Manchester, vol. 84(2), pages 125-158, March.
    12. Li, Keming & Lockwood, Jimmy & Miao, Hong, 2017. "Risk-shifting, equity risk, and the distress puzzle," Journal of Corporate Finance, Elsevier, vol. 44(C), pages 275-288.
    13. Hall, Bronwyn H. & Lerner, Josh, 2010. "The Financing of R&D and Innovation," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 609-639, Elsevier.
    14. Pawlina, Grzegorz, 2010. "Underinvestment, capital structure and strategic debt restructuring," Journal of Corporate Finance, Elsevier, vol. 16(5), pages 679-702, December.
    15. Yu Lu, 2017. "Seeking Finance, Perceived Financial Constraints and R&D Engagement," Post-Print hal-02559421, HAL.
    16. Zhang, Andrew Jianzhong, 2012. "Distress risk premia in expected stock and bond returns," Journal of Banking & Finance, Elsevier, vol. 36(1), pages 225-238.
    17. Joseph R. Mason, 2002. "A Real Options Approach to Bankruptcy Costs: Evidence from Failed Commercial Banks During the 1990s," Center for Financial Institutions Working Papers 02-20, Wharton School Center for Financial Institutions, University of Pennsylvania.
    18. Mihaela Diaconu, 2016. "Determinants of Financing Decisions in Innovative Firms: A Review on Theoretical Backgrounds and Empirical Evidence," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 198-203, February.
    19. Taoufik Elkemali & Aymen Ben Rejeb, 2015. "R&D Intensity and Financing Decisions: Evidence from European Firms," Economics Bulletin, AccessEcon, vol. 35(2), pages 1042-1055.
    20. Hur, Sewon & Kondo, Illenin O., 2016. "A theory of rollover risk, sudden stops, and foreign reserves," Journal of International Economics, Elsevier, vol. 103(C), pages 44-63.
    21. Wright, Mike & Siegel, Donald S. & Keasey, Kevin & Filatotchev, Igor (ed.), 2013. "The Oxford Handbook of Corporate Governance," OUP Catalogue, Oxford University Press, number 9780199642007, Decembrie.
    22. Behrens, Vanessa & Berger, Marius & Hud, Martin & Hünermund, Paul & Iferd, Younes & Peters, Bettina & Rammer, Christian & Schubert, Torben, 2017. "Innovation activities of firms in Germany - Results of the German CIS 2012 and 2014: Background report on the surveys of the Mannheim Innovation Panel Conducted in the Years 2013 to 2016," ZEW Dokumentationen 17-04, ZEW - Leibniz Centre for European Economic Research.
    23. Banerjee, Pradip, 2022. "Nature of financial constraints and R&D intensity," Finance Research Letters, Elsevier, vol. 50(C).
    24. Rammer, Christian & Peters, Bettina, 2015. "Dokumentation zur Innovationserhebung 2014: Innovationen mit Bezug zur Energiewende, Finanzierung von Innovationen," ZEW Dokumentationen 15-02, ZEW - Leibniz Centre for European Economic Research.
    25. Ian Davidson & Yoshikatsu Shinozawa & Mark Tippett, 2009. "Capital Project Analysis When Cash Flows Evolve as a Continuous Time Branching Process," Abacus, Accounting Foundation, University of Sydney, vol. 45(1), pages 44-65, March.

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