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Flexible Prices and Leverage

Listed author(s):
  • Franceso D'Acunto

    ()

    (University of California Berkeley Haas)

  • Ryan Liu

    ()

    (Haas School of Business, University of California at Berkeley)

  • Carolin Pflueger

    (University of British Columbia)

  • Michael Weber

    (University of Chicago Booth School of Business)

The frequency with which firms adjust output prices helps explain persistent differences in capital structure across firms. Unconditionally, the most exible-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 exible-price firms following the staggered implementation of the Interstate Banking and Branching Efficiency Act 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.

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File URL: http://econresearch.uchicago.edu/sites/econresearch.uchicago.edu/files/No.%202017-02.pdf
File Function: January 2017 Version
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Paper provided by Becker Friedman Institute for Research In Economics in its series Working Papers with number 2017-02.

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Date of creation: 2017
Handle: RePEc:bfi:wpaper:2017-02
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