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| Does Interest Rate Liberalization Reduce the Cost of Debt Financing |
| ZHANG Weihua, MAO Xinshu, LIU Kaixuan
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Beijing Technology and Business University;
Audit Service Center of China National Audit Office for Foreign Loan and Assistance Porjects |
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Abstract In recent years, China has made lots of progress on interest rate liberalization, especially in cancelling the lower limit of loan interest rate in 2013.This provides a natural experimental area for us to prove how economic policy influences company’s financing behavior.This paper examines the relationship between interest rate liberalization and cost of debt financing by using A share listed companies from 2007 to 2016.We find that companies obtain debt financing at a lower cost when the interest rate liberalization is at a higher level.Compared with companies which don’t have internal market, the ones with internal market get funds at a lower cost.With the development of interest rate liberalization, companies without internal market will have lower debt financing cost.Our findings have reference value for debt financing choice, internal markets and group financing companies.
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Received: 02 January 2018
Published: 16 November 2018
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