Profitability and capital structure: Evidence from import penetration

• 成果类型: Article
• 署名作者: Xu, Jin
• 署名单位: Purdue University System; Purdue University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2012.05.015
• 发表日期: 2012
• 页码: 427-446
• 关键词: Expected profitability; leverage; import competition

摘要

Firms experiencing increases in import competition significantly reduce their leverage ratios by issuing equity and selling assets to repay debt. Using import tariffs and foreign exchange rates as instrumental variables for import penetration, I show that these results are not manifestations of endogenous relations between import competition and leverage. The results are consistent with traditional trade-off models of capital structure that predict a positive relation between book leverage and expected future profitability. Further evidence suggests that import competition affects leverage through changes in the trade-off between the tax benefits of debt and the costs of financial distress. (C) 2012 Elsevier B.V. All rights reserved.