Working Paper: CEPR ID: DP1778
Authors: Luigi Zingales
Abstract: This paper studies the impact that capital market imperfections have on the natural selection of the most efficient firms by estimating the effect of the pre-deregulation level of leverage on the survival of trucking firms after the Carter deregulation. Highly leveraged carriers are less likely to survive the deregulation shock, even after controlling for various measures of efficiency. This effect is stronger in the imperfectly competitive segment of the motor carrier industry. High debt seems to affect survival by curtailing investments and reducing the price per-ton-mile that a carrier can afford to charge after deregulation.
Keywords: capital structure; product market competition; trucking industry
JEL Codes: G3; L1; L9
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| High leverage (G19) | Investment capabilities (G31) |
| High leverage (G19) | Pricing strategies (D49) |
| Efficiency and financial resources (G53) | Survival of firms (L21) |
| Higher leverage at the onset of deregulation (G18) | Likelihood of firm exit (G33) |