Foreign Currency Borrowing by Small Firms

72 Pages Posted: 7 Feb 2009

See all articles by Martin Brown

Martin Brown

University of St. Gallen

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR)

Pinar Yesin

Swiss National Bank

Multiple version iconThere are 4 versions of this paper

Date Written: February 6, 2009


We examine, from a theoretical and empirical perspective, the determinants of foreign currency borrowing by small firms. Our empirical analysis is based on survey responses from 9,655 firms in 26 transition countries. We find that firms with foreign currency income are more likely to borrow in foreign currency, while firm-level distress costs and transparency hardly affect currency denomination. At the country level, we find that interest rate differentials and exchange rate volatility do not explain the foreign currency borrowing in our sample, while foreign bank presence and weak corporate governance encourage foreign currency borrowing.

Keywords: foreign currency borrowing, competition, banking sector, market structure.

JEL Classification: G21, G30, F34, F37

Suggested Citation

Brown, Martin and Ongena, Steven R. G. and Yeşin, Pınar, Foreign Currency Borrowing by Small Firms (February 6, 2009). EFA 2009 Bergen Meetings Paper. Available at SSRN: or

Martin Brown (Contact Author)

University of St. Gallen ( email )

Unterer Graben 21
St. Gallen, CH-9000

Steven R. G. Ongena

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000

Centre for Economic Policy Research (CEPR)

United Kingdom

Pınar Yeşin

Swiss National Bank ( email )

Boersenstrasse 15, P.O.Box
Zurich, CH-8022
41-58-631-3969 (Phone)


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