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The Effects of Ownership Structure on Borrowing Rate: The Case of Listed Iranian Companies

Sajad Ebrahimi

Millennial Asia, 2022, vol. 13, issue 1, 35-59

Abstract: The Iranian banking system engages in financial repression, and there are legal restrictions on interest rate. However, micro-evidence shows that the interest rates paid by Iranian firms in this condition are different across firms. This article aims to investigate the roots of the difference in borrowing rates by exploring the effects of the borrowers’ ownership structure and bank–firm relationship features. Using data collected from companies listed in the Tehran Stock Exchange (TSE) for the period 2007–2016, empirical models are estimated through applying the dynamic panel data regression method. According to the estimation results, the presence of an institutional stockholder, and particularly banks, among a firm’s shareholders can generally reduce its borrowing rate. Moreover, the results show that the financing rate is significantly lower in the firms with more than 20 per cent of their shares owned by the government. In addition, the findings suggest that borrowers of unhealthy banks, in terms of non-performing loans (NPL), bear a higher finance rate.

Keywords: Borrowing rate; bank–firm relationship; shareholder structure; non-performing loan (NPL); stock market companies (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1177/0976399620972530

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