Capital Structure Choices and Survival in a Deregulated Environment

We examine the impact of capital structure choices for survival in a deregulated industry. Financial leverage in particular has been identified by numerous prior studies as a major determinant of the probability of survival in most industries. In the course of a deregulation, the debt overhang effect stemming from high leverage negatively affects the ability of existing firms to survive when a regulatory shock occurs (Zingales, 1998). Following such a regulatory shock, and consistent with the tradeoff and debt overhang theories of capital structure, firms are more likely to reduce their level of leverage (Ovtchinnikov, 2010). This causes the expected costs of financial distress to rise higher and we can expect a negative association between leverage and survival in a deregulated industry. However, in a highly competitive setting, firms may signal their level of quality by contracting for more debt instead of equity (Ross, 1977). This signaling perspective can therefore induce the existence of a positive association between leverage and survival in a deregulated context. Using a sample of private trucking firms, we test this hypothesis and find a negative association between leverage and survival. In a refined analysis aimed at distinguishing high “quality” versus low “quality” firms, we adopt the “excess capacity” approach of De Vany and Saving (1977). Consistent with our initial findings, we find that the negative association between leverage and survival increases with the level of excess capacity

Benefits and Strategic Outcomes: Are Supplemental Retirement Plans and Safer Driving Related in the U.S. Trucking Industry?

We suggest that a firm's benefits can relate to important organizational outcomes that have strategic implications. We propose a number of mechanisms that could relate benefits to strategic outcomes, including the notion that benefits can help attract and retain the type of employees who are most likely to perform in ways consistent with the firms’ strategies. We illustrate this with the case of supplemental retirement benefits in an actual setting, the long‐haul trucking industry. We report positive organization‐level relationships associated with the management choice of offering these benefits. Our results show that firms offering supplemental retirement plans engage in significantly safer driving practices, as measured by the proxy of driver insurance costs, as hypothesized. These findings show that benefits can be related to outcomes that have strategic implications for the firm. By showing that retirement plans may be of value to organizations, we help to bridge the academic‐practitioner divide and provide motivation and guidance for additional work on this important but underresearched topic