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


  • Luigi Zingales

    1. Graduate School of Business, University of Chicago
    Search for more papers by this author
    • Graduate School of Business, University of Chicago. I wish to thank Abhay Pande for interesting me in the trucking industry, and Judy Chevalier, Kent Daniel, Colin Mayer, Antonio Merlo, Marzio Galeotti, Austan Goolsbee, Charlie Himmelberg, Vojislav Maksimovic, Steve Kaplan, Anil Kashyap, Sam Peltzman, Raghu Rajan, Fabio Schiantarelli, Per Stromberg, Sheridan Titman, Rob Vishny, an anonymous referee, René Stulz (the editor), and participants at seminars at a CEPR conference on “International Perspectives on the Macroeconomic and Microeconomic Implications of Financing Constraints,” in Bergamo, the University of Chicago, the London Business School, the NBER, the WFA meetings, and the AEA meetings for useful comments. Andy Pruitt provided excellent research assistance. Research expenses have been supported by the Center for the Study of the Economy and the State. The author also acknowledges financial support from the Center for Research in Security Prices and NSF grant #SBR-9423645.


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 ton-mile that a carrier can afford to charge after deregulation.