EconPapers    
Economics at your fingertips  
 

Impact of interest rate swaps on corporate capital structure: an empirical investigation

Jian Yang (), George Davis and David Leatham ()

Applied Financial Economics, 2001, vol. 11, issue 1, 75-81

Abstract: Interest rate swaps are the most popular financial derivatives used by US firms. In this paper, the effects of swap usage on corporate financing decisions are empirically examined. Based on a dynamic capital structure theoretical model, a seemingly unrelated regression model with a heteroscedasticity-consistent covariance estimator to estimate these effects is employed. The empirical results show that the firms with higher effective tax rates reduce their optimal debt ratio range when they use interest rate swaps. It was also found that the swap users may enlarge the influence of firm size on corporate dynamic debt policy, though it was not clear that it helped reduce or increase the optimal debt ratio range. No effect of swaps usage on the optimal debt ratio range was found related to bankruptcy costs and the volatility of income. The findings imply that the use of swaps can help firms stick to an initial high debt ratio and make more use of the large tax benefits of debts on debt financing decisions.

Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/09603100150210282 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: IMPACT OF INTEREST RATE SWAPS ON CORPORATE CAPTIAL STRUCTURE: AN EMPIRICAL INVESTIGATION (1998) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:apfiec:v:11:y:2001:i:1:p:75-81

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAFE20

DOI: 10.1080/09603100150210282

Access Statistics for this article

Applied Financial Economics is currently edited by Anita Phillips

More articles in Applied Financial Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

 
Page updated 2021-10-13
Handle: RePEc:taf:apfiec:v:11:y:2001:i:1:p:75-81