Prof. Michael Weber (The University of Chicago)
- Datum: 14.09.2016
Zeit: 17:00 - 19:00
Ort: Ludwigstraße 28, VG, Raum 211b
Titel: Flexible Prices and Leverage
The frequency with which ﬁrms adjust output prices is an important determinant of persistent diﬀerences in capital structure across ﬁrms. The most ﬂexible-price ﬁrms have a 19% higher long-term ﬁnancial leverage ratio than the most sticky-price ﬁrms, controlling for known determinants of capital structure. We rationalize this novel fact in a costly-state-veriﬁcation model, in which sticky-price ﬁrms are more exposed to shocks, and face tighter ﬁnancial constraints. In the model, a better monitoring ability reduces asymmetric information and narrows the leverage gap between inﬂexible- and ﬂexible-price ﬁrms. Consistently, 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 triple-diﬀerences identiﬁcation strategy. Firms’ frequency of price adjustment did not change around the deregulation.