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Flexible Prices and Leverage

Listed author(s):
  • Francesco D’Acunto
  • Ryan Liu
  • Carolin Pflueger
  • Michael Weber

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 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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 23066.

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Date of creation: Jan 2017
Handle: RePEc:nbr:nberwo:23066
Note: CF EFG ME
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