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Flexible prices and leverage

D’Acunto, Francesco, Ryan Liu, Carolin Pflueger and Michael Weber ()

Journal of Financial Economics, 2018, vol. 129, issue 1, 46-68

Abstract: The frequency with which firms adjust output prices helps explain persistent differences in capital structure across firms. Unconditionally, the most flexible-price firms have a 19% higher long-term leverage ratio than the most sticky-price firms, controlling for known determinants of capital structure. Sticky-price firms increased leverage more than flexible-price firms following the staggered implementation of bank deregulation across states and over time, which we use in a difference-in-differences strategy. Firms’ frequency of price adjustment did not change around the deregulation.

Keywords: Capital structure; Nominal rigidities; Bank deregulation; Industrial organization and finance; Price setting; Bankruptcy (search for similar items in EconPapers)
JEL-codes: E12 E44 G28 G32 G33 (search for similar items in EconPapers)
Date: 2018
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Related works:
Working Paper: Flexible Prices and Leverage (2017) Downloads
Working Paper: Flexible Prices and Leverage (2017) Downloads
Working Paper: Flexible Prices and Leverage (2017) Downloads
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