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Asset liquidation values are an important determinant of distress costs and therefore optimal capital structure. Capital structure theories typically assume liquidation values are exogenous even though they may be determined in part by the debt choices of firms in the industry (Shleifer and Vishny, 1992; Pulvino, 1998) . We develop a model in which high industry debt leads to a greater supply of assets for sale by distressed firms but also lower demand for assets from relatively healthy firmsdoi:10.2139/ssrn.2511379 fatcat:knqzyzfsebcdxfz63wlk56zmni