Liquidation Costs and Accounting Data

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.