Asset Specificity and Corporate Governance: An Empirical Test

This study develops a model for estimating an index measure of asset specificity based on the liquidation value of corporate firms and the proportional distribution of their pre-liquidation assets. A statistically significant positive relationship was found to exist between the estimated specificity...

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Bibliographic Details
Published inManagerial finance Vol. 22; no. 2; pp. 16 - 28
Main Authors Cushing, Woodrow W, McCarty, Daniel E
Format Journal Article
LanguageEnglish
Published Patrington MCB UP Ltd 01.02.1996
Emerald Group Publishing Limited
Subjects
Accounts receivable
Advertising
Assets
Bankruptcy
Corporate governance
Economic models
Equity
Financial leverage
Financial management
Hypotheses
Liquidation
R&D
Research & development
Research & development expenditures
Studies
Time series
Variables
United States > US
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Summary:This study develops a model for estimating an index measure of asset specificity based on the liquidation value of corporate firms and the proportional distribution of their pre-liquidation assets. A statistically significant positive relationship was found to exist between the estimated specificity index and financial leverage supporting the theoretical prediction. Additional evidence was found that firms with higher variability in sales, lower probabilities of failure, higher valued non-debt tax shields and higher levels of financial slack use less financial leverage.
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ISSN:0307-4358
1758-7743
DOI:10.1108/eb018546