Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/60523
Authors: 
Vickery, James
Year of Publication: 
2005
Series/Report no.: 
Staff Report, Federal Reserve Bank of New York 215
Abstract: 
Although small firms are particularly sensitive to interest rates and other external 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 showing that the supply of internal and external finance shrinks during periods of rising interest rates. Banks originate a higher share of adjustable-rate loans than other lender types, ameliorating maturity mismatch and exposure to the lending channel of monetary policy. Time-series patterns in the share of fixed-rate commercial loans are consistent with recent evidence on debt market timing.
Subjects: 
fixed-rate loan
adjustable-rate loan
corporate risk management
interest rate risk
JEL: 
G21
G30
Document Type: 
Working Paper

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