NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Flexible Prices and Leverage

Francesco D’Acunto, Ryan Liu, Carolin Pflueger, Michael Weber

NBER Working Paper No. 23066
Issued in January 2017
NBER Program(s):Corporate Finance, Economic Fluctuations and Growth, Monetary Economics

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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Document Object Identifier (DOI): 10.3386/w23066

Published: Francesco D’Acunto & Ryan Liu & Carolin Pflueger & Michael Weber, 2018. "Flexible prices and leverage," Journal of Financial Economics, .

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