D'Acunto, Francesco Liu, Ryan Pflueger, Carolin Weber, Michael
Year of Publication:
CESifo Working Paper 6317
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.
capital structure nominal rigidities bank deregulation industrial organization and finance price setting bankruptcy