Journal of Financial Economics Vol. 87 No. 2 2008
How and why do small firms manage interest rate risk☆
Abstract
Although small firms are particularly sensitive to interest rates and other shocks, empirical work on corporate risk management has focused instead on large public companies. This paper studies fixed-rate and adjustable-rate loans to see how small firms manage their exposure to interest rate risk. Credit-constrained firms are found to match significantly more often with fixed-rate loans, consistent with prior research that shows the supply of credit shrinks during periods of rising interest rates. Banks originate a higher share of adjustable-rate loans than other lenders, ameliorating maturity mismatch and exposure to the lending channel of monetary policy. Time-series patterns in the fixed-rate share are consistent with recent evidence on debt market timing.
- DOI
- 10.1016/j.jfineco.2006.09.011
- Volume
- 87
- Issue
- 2
- Pages
- 446-470
- Language
- en
- Sources
- bibtex:phds-export.bib crossref openalex