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:: year 14, Issue 47 (6-2021) ::
JMBR 2021, 14(47): 155-186 Back to browse issues page
Estimating Loan Rate: A Case Study of Iranian Listed Companies
Amineh Mahmoudzadeh *1, Seyyed Ali Madanizadeh2, Morteza Nateghi3
2- Graduate School of Management and Economics, Sharif University of Technology.
3- Unversity College London
Abstract:   (283 Views)
Asymmetric information and uncertain macro-situation make loaning risky and affect loan conditions, including loan rates. Due to limitations in data availability, there is little information about rates in Iran. We try to estimate loan rates based on the information of observable and potentially correlated risk factors. Three types of risks affect the bank-firm relationship: the firm's credit risk, the bank's operational risk, and the macroeconomic environment risk. In this study, using data from 260 listed companies and 34 banks, we have estimated the facility rate and found its correlations. Based on Iranian listed companies' financial and ownership data from 2007 to 2018, we drive our results using a novel idea of connecting firms' total financial cost with the risk factors connected to each loan. We show that the firm's credit risk variables, working capital ratio, net profit ratio, and fixed assets ratio, are negatively correlated with the loan rate, and debt ratio is positively correlated with the rate. The communication factors between the bank and the firm, which reduce the information asymmetry or increase the management power of the bank in the firm, also have a negative correlation with the facility's interest rate. In contrast, a lower loan rate accompanies higher banks' voting rights in the firm, which is aligned with connected lending observation in Iran. Administration cost is positively correlated among the factors related to the bank's risk. However, our results show a very high correlation between loan rates and the rate approved by the Monetary and Credit Council. It can undermine the transparency of the bank-firm financial relationship.
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Type of Study: Empirical Study | Subject: Financial Institutions and Services (G2)
Received: 2021/01/20 | Accepted: 2021/05/16 | Published: 2021/11/17
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year 14, Issue 47 (6-2021) Back to browse issues page
فصلنامه پژوهش‌های پولی-بانکی Journal of Monetary & Banking Research
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