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Article: Production flexibility, product markets, and capital structure decisions
Title | Production flexibility, product markets, and capital structure decisions |
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Authors | |
Issue Date | 2016 |
Publisher | Oxford 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? |
Abstract | We 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 Identifier | http://hdl.handle.net/10722/224893 |
ISSN | 2023 Impact Factor: 6.8 2023 SCImago Journal Rankings: 17.654 |
SSRN | |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Reinartz, SJ | - |
dc.contributor.author | Schmid, T | - |
dc.date.accessioned | 2016-04-18T03:33:51Z | - |
dc.date.available | 2016-04-18T03:33:51Z | - |
dc.date.issued | 2016 | - |
dc.identifier.citation | The Review of Financial Studies, 2016, v. 29 n. 6, p. 1501–1548 | - |
dc.identifier.issn | 0893-9454 | - |
dc.identifier.uri | http://hdl.handle.net/10722/224893 | - |
dc.description.abstract | We 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.language | eng | - |
dc.publisher | Oxford University Press. The Journal's web site is located at http://rfs.oxfordjournals.org/ | - |
dc.relation.ispartof | The Review of Financial Studies | - |
dc.rights | This 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.title | Production flexibility, product markets, and capital structure decisions | - |
dc.type | Article | - |
dc.identifier.email | Schmid, T: schmid@hku.hk | - |
dc.identifier.authority | Schmid, T=rp02028 | - |
dc.description.nature | postprint | - |
dc.identifier.doi | 10.1093/rfs/hhv126 | - |
dc.identifier.scopus | eid_2-s2.0-84973322835 | - |
dc.identifier.hkuros | 257570 | - |
dc.identifier.volume | 29 | - |
dc.identifier.issue | 6 | - |
dc.identifier.spage | 1501 | - |
dc.identifier.epage | 1548 | - |
dc.identifier.isi | WOS:000377430500004 | - |
dc.publisher.place | United Kingdom | - |
dc.identifier.ssrn | 2081902 | - |
dc.identifier.issnl | 0893-9454 | - |