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Article: Production flexibility, product markets, and capital structure decisions

TitleProduction flexibility, product markets, and capital structure decisions
Authors
Issue Date2016
PublisherOxford University Press. The Journal's web site is located at http://rfs.oxfordjournals.org/
Citation
The Review of Financial Studies, 2016, v. 29 n. 6, p. 1501–1548 How to Cite?
AbstractWe examine how production flexibility affects financial leverage. A worldwide sample of energy utilities allows us to apply direct measures for production flexibility based on their power plants. We find that production flexibility increases financial leverage. For identification, we exploit privatizations and deregulations of electricity markets, geographical variations in natural resources, the technological evolution of gas-fired power plants, and differences in electricity prices and recapitalization cost across regions. Production flexibility affects financial leverage via the channels of reduced expected cost of financial distress and higher present value of tax shields. The relative importance of these channels depends on firms' profitability.
Persistent Identifierhttp://hdl.handle.net/10722/224893
ISSN
2015 Impact Factor: 3.119
2015 SCImago Journal Rankings: 9.925
SSRN

 

DC FieldValueLanguage
dc.contributor.authorReinartz, SJ-
dc.contributor.authorSchmid, T-
dc.date.accessioned2016-04-18T03:33:51Z-
dc.date.available2016-04-18T03:33:51Z-
dc.date.issued2016-
dc.identifier.citationThe Review of Financial Studies, 2016, v. 29 n. 6, p. 1501–1548-
dc.identifier.issn0893-9454-
dc.identifier.urihttp://hdl.handle.net/10722/224893-
dc.description.abstractWe examine how production flexibility affects financial leverage. A worldwide sample of energy utilities allows us to apply direct measures for production flexibility based on their power plants. We find that production flexibility increases financial leverage. For identification, we exploit privatizations and deregulations of electricity markets, geographical variations in natural resources, the technological evolution of gas-fired power plants, and differences in electricity prices and recapitalization cost across regions. Production flexibility affects financial leverage via the channels of reduced expected cost of financial distress and higher present value of tax shields. The relative importance of these channels depends on firms' profitability.-
dc.languageeng-
dc.publisherOxford University Press. The Journal's web site is located at http://rfs.oxfordjournals.org/-
dc.relation.ispartofThe Review of Financial Studies-
dc.rightsThis is a pre-copy-editing, author-produced PDF of an article accepted for publication in The Review of Financial Studies following peer review. The definitive publisher-authenticated version The Review of Financial Studies, 2016, v. 29 n. 6, p. 1501–1548 is available online at: https://academic.oup.com/rfs/article-abstract/29/6/1501/2583640?redirectedFrom=fulltext-
dc.rightsThis work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.-
dc.titleProduction flexibility, product markets, and capital structure decisions-
dc.typeArticle-
dc.identifier.emailSchmid, T: schmid@hku.hk-
dc.identifier.authoritySchmid, T=rp02028-
dc.description.naturepostprint-
dc.identifier.doi10.1093/rfs/hhv126-
dc.identifier.hkuros257570-
dc.identifier.volume29-
dc.identifier.issue6-
dc.identifier.spage1501-
dc.identifier.epage1548-
dc.publisher.placeUnited Kingdom-
dc.identifier.ssrn2081902-

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