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Conference Paper: Inflexibility and Leverage
Title | Inflexibility and Leverage |
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Authors | |
Issue Date | 2019 |
Publisher | Financial Management Association. |
Citation | 2019 Financial Management Association Asia/Pacific Conference, Ho Chi Minh City, Vietnam, 10-17 July 2019 How to Cite? |
Abstract | We examine whether a firm’s inflexibility (i.e., inability to adjust its scale in response to profitability shocks) influences its financial policy. Based on a firm’s historical range of operating costs-to-sales ratio, scaled by the volatility of its sales growth, we find robust evidence that inflexible firms adopt a lower level of financial leverage compared with flexible firms after controlling for well-known drivers of capital structure. Following a positive credit supply shock induced by staggered state-level bank branching deregulation, inflexible firm increase leverage more than flexible firms. These results suggest that operating flexibility plays an important role in shaping corporate financial policies. |
Description | Session 11: Firm Leverage |
Persistent Identifier | http://hdl.handle.net/10722/278985 |
DC Field | Value | Language |
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dc.contributor.author | Gu, L | - |
dc.contributor.author | Hackbarth, D | - |
dc.contributor.author | LI, T | - |
dc.date.accessioned | 2019-10-21T02:17:31Z | - |
dc.date.available | 2019-10-21T02:17:31Z | - |
dc.date.issued | 2019 | - |
dc.identifier.citation | 2019 Financial Management Association Asia/Pacific Conference, Ho Chi Minh City, Vietnam, 10-17 July 2019 | - |
dc.identifier.uri | http://hdl.handle.net/10722/278985 | - |
dc.description | Session 11: Firm Leverage | - |
dc.description.abstract | We examine whether a firm’s inflexibility (i.e., inability to adjust its scale in response to profitability shocks) influences its financial policy. Based on a firm’s historical range of operating costs-to-sales ratio, scaled by the volatility of its sales growth, we find robust evidence that inflexible firms adopt a lower level of financial leverage compared with flexible firms after controlling for well-known drivers of capital structure. Following a positive credit supply shock induced by staggered state-level bank branching deregulation, inflexible firm increase leverage more than flexible firms. These results suggest that operating flexibility plays an important role in shaping corporate financial policies. | - |
dc.language | eng | - |
dc.publisher | Financial Management Association. | - |
dc.relation.ispartof | 2019 Financial Management Association Asia/Pacific Conference | - |
dc.title | Inflexibility and Leverage | - |
dc.type | Conference_Paper | - |
dc.identifier.email | Gu, L: oliviagu@hku.hk | - |
dc.identifier.authority | Gu, L=rp01802 | - |
dc.identifier.hkuros | 307585 | - |