This paper examines whether firms with market values less than book values continue to exist because management does not want to utilize the adaptation option. If managers have the option to adapt assets (either internally or externally via selling the firm) to other uses when the expected net present value from current earnings is less than liquidation values, then a book-to market (BTM) ratio greater than one should not be observed. However, a sample from 1992 to 2009 indicates 35,575 continuous firm-month observations where the BTM ratio is above one. I specifically investigate whether the relation between entrenchment techniques, market discipline, changes in management, and undervaluation signaling is correlated with firms continuing with an BTM greater than one. Results are consistent with the entrenchment techniques, market discipline, and changing management hyp theses, but not with signaling. This paper extends the research on the adaptation option and provides an explicit link between firm value and corporate governance.