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.
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