The Impact Of Interest Rates On Firms Financial Decisions

ArXiv ID: 2311.14738 “View on arXiv”

Authors: Unknown

Abstract

Financial decisions are the decisions that managers take with regard to the finances of a company. This article aims to examine and explain the effect of interest rates on economic and financial decisions such as investment, funding, and dividend in a firm. This research uses the correlation coefficient analysis methods and descriptive methods to illustrate the relationship between interest rates and financial decisions. The data used in this research was obtained from several government reports and leading economic sources. The results of this research show that interest rates have a negatively insignificant effect on investment and funding decisions, but positively moderate effect on dividend decisions.

Keywords: Corporate Finance, Investment Decisions, Dividend Policy, Interest Rates, Funding Decisions

Complexity vs Empirical Score

• Math Complexity: 2.0/10
• Empirical Rigor: 3.0/10
• Quadrant: Philosophers
• Why: The paper uses basic statistical methods (correlation, descriptive stats) and simple financial ratios (PER, DER, DPR) without advanced derivations, resulting in low math complexity. It relies on aggregated annual data from public sources (government reports, stock exchange) and performs simple correlation analysis without backtests, simulations, or high-frequency data, yielding low empirical rigor.

  flowchart TD
    A["Research Goal:<br>Impact of Interest Rates on<br>Financial Decisions"] --> B["Data Collection<br>Gov Reports & Economic Sources"]
    B --> C["Methodology<br>Correlation & Descriptive Analysis"]
    C --> D["Analysis of Key Variables:<br>Investment, Funding, Dividends"]
    D --> E["Key Findings"]
    E --> F["Investment: Neg. & Insignificant"]
    E --> G["Funding: Neg. & Insignificant"]
    E --> H["Dividends: Pos. & Moderate"]