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Determinants of Corporate Loan Interest Rate: Case of Ukraine

Author

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  • Solomiya Shpak

    (National Bank of Ukraine
    Kyiv School of Economics)

Abstract

This paper estimates the effect of loan, borrower, and bank characteristics on corporate loan pricing in Ukraine using rich loan-borrower-bank monthly panel data from 2013 and 2020 combined with data from borrowers’ financial statements. Examining an extensive set of fixed effects, we find that larger loans, loans with a shorter maturity period and larger collateral value have lower interest rates even after controlling for borrower characteristics. We also find that larger borrowers, borrowers with more tangible assets, lower indebtedness, and a higher interest coverage ratio who operate in concentrated industries secure lower interest rates. Our findings suggest that it is crucial to take into consideration both loan and borrower characteristics when estimating the effects of banks’ health on the loan interest rate.

Suggested Citation

  • Solomiya Shpak, 2021. "Determinants of Corporate Loan Interest Rate: Case of Ukraine," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 251, pages 4-13.
    • Handle: RePEc:ukb:journl:y:2021:i:251:p:4-13
    DOI: 10.26531/vnbu2021.251.01
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    File URL: https://journal.bank.gov.ua/en/article/2021/251/01
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    References listed on IDEAS

    as
    1. Graham, John R. & Li, Si & Qiu, Jiaping, 2008. "Corporate misreporting and bank loan contracting," Journal of Financial Economics, Elsevier, vol. 89(1), pages 44-61, July.
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    3. Althammer, Wilhelm & Haselmann, Rainer, 2011. "Explaining foreign bank entrance in emerging markets," Journal of Comparative Economics, Elsevier, vol. 39(4), pages 486-498.
    4. Dell'Ariccia, Giovanni & Marquez, Robert, 2004. "Information and bank credit allocation," Journal of Financial Economics, Elsevier, vol. 72(1), pages 185-214, April.
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    More about this item

    Keywords

    Ukraine; credit supply; credit demand; cost of debt;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • P34 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Finance

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