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Corporate Finance Under Low Interest Rates: Evidence from Hong Kong

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Author Info
Paul Mizen (Hong Kong Institute for Monetary Research, University of Nottingham)
Cihan Yalcin (University of Nottingham, University Park)

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Abstract

This paper examines the impact of the dramatic reduction in interest rates by the Federal Reserve on Hong Kong. Using a panel of several hundred firms in Hong Kong we find that firms increase all types of debt, but shift from short-term to long-term debt as rates fall. This can be attributed in part to a supplyside effect as the benign monetary policy environment has improved creditworthiness. The most noticable result from our analysis is the high level of bank dependence among Hong Kong firms and the continued dependence on bank finance even when interest rates fall. Potentially this may reveal that Hong Kong lacks the benefits of a deep domestic bond market.

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Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 112005.

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Length: 32 pages
Date of creation: Nov 2005
Date of revision:
Handle: RePEc:hkm:wpaper:112005

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  7. Spiros Bougheas & Paul Mizen & Cihan Yalcin, 2004. "Access to External Finance : Theory and Evidence on the Impact of Firm-Specific Characteristics," Working Papers 0406, Research and Monetary Policy Department, Central Bank of the Republic of Turkey. [Downloadable!]
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  10. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November. [Downloadable!] (restricted)
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  12. Franklin Allen, 2004. "Financial Systems in Europe, the USA, and ASIA," Oxford Review of Economic Policy, Oxford University Press, vol. 20(4), pages 490-508, Winter.
  13. Benoit Mulkay & Bronwyn H. Hall & Jacques Mairesse, 2001. "Firm Level Investment and R&D in France and the United States: A Comparison," Economics Papers 2001-W2, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
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  14. Stephen Bond & Julie Ann Elston & Jacques Mairesse & Benoît Mulkay, 2003. "Financial Factors and Investment in Belgium, France, Germany, and the United Kingdom: A Comparison Using Company Panel Data," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 153-165, 09. [Downloadable!] (restricted)
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