DP1778 Survival of the Fittest or the Fattest? Exit and Financing in the Trucking Industry

Author(s): Luigi Zingales
Publication Date: January 1998
Keyword(s): Capital Structures, Product Market Competition, trucking industry
JEL(s): G3, L1, L9
Programme Areas: Financial Economics, Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1778

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.