Template-Type: ReDIF-Paper 1.0
Author-Name: Richard Fabling
Author-X-Name-First: Richard	
Author-X-Name-Last: Fabling
Author-Email: richard.fabling@xtra.co.nz
Author-Workplace-Name: Independent Researcher
Title: Of interest? Estimating the average interest rate on debt across firms and over time.
Abstract: We use tax data from the Longitudinal Business Database to estimate the firm-level average interest rate on liabilities. The mean of this measure has similar time series properties to official statistics on the business borrowing rate, while also enabling detailed disaggregation across different firm types. We document significant variation in interest rate across firms in different industries, and across firms with different apparent borrowing risk. Finally, we compare firms self-reported views on whether they are finance-constrained to an estimated firm-specific interest rate premium, showing that: finance-constrained firms have higher interest rate premia than unconstrained firms; and that at least part of this difference in premia is explained by firm-level differences in risk between constrained and unconstrained firms.
Length: 40 pages
Creation-Date:  2021-05
File-URL: https://motu-www.motu.org.nz/wpapers/21_05.pdf
Number: 21_05
Classification-JEL: E43; G32; M21
Keywords: Finance constraints; interest rates; risk premia; Longitudinal Business Database
Handle: RePEc:mtu:wpaper:21_05