The Impact of Financial Incentives on Firm Behavior

Download or read book The Impact of Financial Incentives on Firm Behavior written by David Matsa and published by . This book was released on 2006 with total page 139 pages. Available in PDF, EPUB and Kindle. Book excerpt: (Cont.) Using U.S. consumer price index microdata to measure the prevalence of out-of-stocks, I find that supermarket leveraged buyouts, which reduce liquidity, increase out-of-stocks by 10 percent. These findings suggest it is important for firms to consider these sorts of real effects on their operations when setting financial policy. Chapter 3 examines financial incentives created by medical malpractice liability. If patients bear the full incidence of cost changes and market demand is inelastic, then marginal changes in malpractice liability will not affect physicians' net income or location decisions. Using county-level, specialty-specific data on physician location from 1970 to 2000, I find that damage caps do not affect physician supply for the average resident of states adopting reforms. On the other hand, caps appear to increase the supply of specialist physicians in the most rural areas by 10 to 12 percent. This is likely because rural doctors face greater uninsured litigation costs and a more elastic demand for medical services.