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

Luigi Zingales
The Journal of Finance
Vol. 53, No. 3 (Jun., 1998), pp. 905-938
Published by: Wiley for the American Finance Association
Stable URL: http://www.jstor.org/stable/117382
Page Count: 34
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Survival of the Fittest or the Fattest? Exit and Financing in the Trucking Industry
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Abstract

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 prederegulation 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 tonmile that a carrier can afford to charge after deregulation.

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