## Why Do Bank-Dependent Firms Bear Interest-Rate Risk?

_IMF Working Papers, January 18, 2017_

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## Bibliographic details
- Authors: Divya Kirti
- Published: January 18, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475568974.001

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### Executive summary
- Floating-rate loans from banks drive most variation in firms' exposure to interest rates, particularly for bank-dependent firms.
- Banks lend to firms at floating rates because banks themselves have floating-rate liabilities.
- The results establish a link between intermediaries' funding structure and the types of contracts used by non-financial firms and highlight a role for banks in the balance-sheet channel of monetary policy.

### Key empirical findings
- Banks with more floating-rate liabilities make more floating-rate loans.
- Banks with more floating-rate liabilities hold more floating-rate securities.
- Banks with more floating-rate liabilities quote lower prices for floating-rate loans.
- Floating-rate loans from banks are particularly important for bank-dependent firms and drive most variation in firms' exposure to interest rates.

### Implications and interpretation
- The funding structure of banks (composition of liabilities) influences the contractual terms offered to non-financial firms.
- Banks play a role in the balance-sheet channel of monetary policy through the interaction of their liabilities and lending contract types.

### Publication and metadata
- Author: Divya Kirti
- Publication date: January 18, 2017
- Series: IMF Working Papers
- Working Paper No.: 2017/003
- Issue: 003
- Volume: 2017
- Pages: 56
- DOI: https://doi.org/10.5089/9781475568974.001
- ISBN: 9781475568974
- ISSN: 1018-5941
- Subjects: Bank credit; Banking; Financial institutions; Financial regulation and supervision; Financial services; Hedging; Loans; Money; Securities; Short term interest rates
- Keywords: bank assets; Bank credit; bank debt; bank holding company; bank lending; bank lending to firm; bank liabilities push bank; bank liability; bank-dependent firm; bank-dependent firms; capital structure; commercial bank; corporate finance; deposit pass-through; floating-rate loan; Hedging; Interest-rate risk; lending to firm; liabilities push bank; Loans; Securities; securities holding; Short term interest rates; WP

*Content based on "Why Do Bank-Dependent Firms Bear Interest-Rate Risk?" by Divya Kirti, IMF Working Paper No. 2017/003 (January 18, 2017).*

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_Source: https://www.imf.org/en/publications/wp/issues/2017/01/18/why-do-bank-dependent-firms-bear-interest-rate-risk-44550_