Michael Beauregard Seminar in Macroeconomics:

Abstract: We develop a new dataset to study asset specificity among non-financial firms. The data covers the liquidation values of all major types of assets across industries. For the determinants of asset specificity, we show that assets’ physical attributes (e.g., mobility, durability, and customization) play a crucial role; macroeconomic and industry conditions have the most impact when assets are not custom designed. We then investigate three implications of asset specificity. First, consistent with theories of investment irreversibility, high asset specificity is associated with less disinvestment, stronger investment response to uncertainty, and greater sensitivity of capital formation across countries to macroeconomic volatility. Second, the increasing prevalence of intangible assets has not significantly reduced firms’ liquidation values, but intangibles appear more scalable. Third, firms have more vertical integration in countries with weaker rule of law when asset specificity is high.

To join the seminar, please contact econ.events@umich.edu