The cost of short-term debt: A study of debt maturity and Swedish real estate firm vulnerability during the 2022-2023 interest rate shock

Sammanfattning

This thesis examines whether the 2022-2023 monetary tightening cycle disproportionately affected listed Swedish real estate firms with greater short-term debt maturity exposure. Using an event study and event-based regressions, where firm outcomes are measured around or after specific monetary policy announcements, three mechanisms are tested: equity valuations, borrowing costs, and balance sheet adjustments. Firms with higher short-term debt shares experienced more negative equity market reactions around policy announcements, suggesting that investors viewed short-term refinancing needs as a source of risk during the tightening cycle. For borrowing costs, a positive and statistically significant relationship is found from the two-quarter horizon onward. This indicates that firms with greater short-term maturity exposure experienced larger increases in borrowing costs as refinancing needs materialized over time. No evidence that firms with higher refinancing exposure reduced leverage is found. The results for investment properties point in the expected direction, with more exposed firms showing weaker growth, but the evidence is weak. Overall, the results suggest that debt maturity structure affected firms' exposure to monetary tightening mainly through equity market reactions and increased borrowing costs, while the evidence for balance sheet adjustment through deleveraging and asset-side adjustment is more limited.