| Autor: |
Francia, Arthur J., Kuiate, Christian, Noland, Thomas R., Porter, Mattie C. |
| Předmět: |
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| Zdroj: |
Allied Academies International Conference: Proceedings of the Academy of Accounting & Financial Studies (AAFS); Apr2012, Vol. 17 Issue 1, p13-13, 1p |
| Abstrakt: |
We examine the impact of capital structure choices for survival in a deregulated industry. Financial leverage in particular has been identified by numerous prior studies as a major determinant of the probability of survival in most industries. In the course of a deregulation, the debt overhang effect stemming from high leverage negatively affects the ability of existing firms to survive when a regulatory shock occurs (Zingales 1998). Following such a regulatory shock and consistent with the tradeoff theory of capital structure, firms are more likely to reduce their level of leverage (Ovtchonikov 2010), rendering the expected costs of financial distress even higher; thus we can expect a negative association between leverage and survival in a deregulated industry. However, in a highly competitive setting, firms may signal their level of quality by contracting for more debt instead of equity (Ross 1977). This signaling perspective can therefore induce the existence of a positive association between leverage and survival in a deregulated context. Using a sample of private trucking firms, we test this hypothesis and find a negative association between leverage and survival. In a refined analysis aimed at distinguishing high "quality" versus low "quality" firms, we adopt the "excess capacity" approach of De Vany and Saving (1977). Contrary to the signaling theory of Ross (1977), we find that the negative association between leverage and survival increases with the level of excess capacity. [ABSTRACT FROM AUTHOR] |
| Databáze: |
Complementary Index |
| Externí odkaz: |
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