Flexible Prices and Leverage

51 Pages Posted: 23 Jan 2017

See all articles by Francesco D'Acunto

Francesco D'Acunto

Boston College

Carolin E. Pflueger

University of Chicago - Harris Public Policy; National Bureau of Economic Research (NBER)

Michael Weber

University of Chicago - Finance

Ryan Liu

University of California, Berkeley

Multiple version iconThere are 4 versions of this paper

Date Written: January 2017

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 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.

Suggested Citation

D'Acunto, Francesco and Pflueger, Carolin E. and Weber, Michael and Liu, Ryan, Flexible Prices and Leverage (January 2017). NBER Working Paper No. w23066. Available at SSRN: https://ssrn.com/abstract=2903733

Francesco D'Acunto (Contact Author)

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Carolin E. Pflueger

University of Chicago - Harris Public Policy ( email )

1155 East 60th Street
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Michael Weber

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Ryan Liu

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

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