Monetary Policy and Financial Statements: Digesting the Firm Balance Sheet
Abstract: The aim of this study was to examine the connection between the key interest rate and firm leverage, and how that connection is affected if the changes in the rate is anticipated or not. In this study we cannot show that the Swedish repo rate is associated with firm leverage. We can however support earlier evidence on the effect of friction when anticipating monetary policy changes. The only significant capital structure determinant we can find support for is profitability. We can thereby not prove a consistent relation between leverage and macroeconomic factors.
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