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Corporate Finance Under Low Interest Rates: Evidence from Hong Kong

Author

Listed:
  • Paul Mizen

    (Hong Kong Institute for Monetary Research, University of Nottingham)

  • Cihan Yalcin

    (University of Nottingham, University Park)

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.

Suggested Citation

  • Paul Mizen & Cihan Yalcin, 2005. "Corporate Finance Under Low Interest Rates: Evidence from Hong Kong," Working Papers 112005, Hong Kong Institute for Monetary Research.
    • Handle: RePEc:hkm:wpaper:112005
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    References listed on IDEAS

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    Cited by:

    1. Tony Latter, 2008. "What Future for the Hong Kong Dollar Corporate Bond Market?," Working Papers 192008, Hong Kong Institute for Monetary Research.

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