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The announcement effect of prime rate changes on South African capital markets: a note

The announcement effect of prime rate changes on South African capital markets: a note L T van der Berg and EvdM Smit* The announcement effect of prime rate changes on South African capital markets: a note the effect of the announcement on the markets on 1. INTRODUCTION the day of the announcement; and The prime rate is the business loan rate that commercial the two days following the announcement. banks charge their most creditworthy customers (Goldberg, 1982:277). It also serves as a base rate for Section 2 deals with the related literature, Section 3 with the data and method and Section 4 with the empirical pricing commercial loans to businesses that may not be as creditworthy. These loans, typically, will have a findings. A final section contains the conclusions. floating interest rate. The prime rate does not fluctuate very often and when it does, it does so in discrete 2. LITERATURE REVIEW amounts (0,25 % at a minimum). If one accepts the fact that companies use debt to In South Africa, the prime rate is closely linked to the maintain a certain level of financial leverage, the choice bank rate. The bank rate is the rate at which the of the type of debt becomes important. When financing Reserve Bank finances the banking http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Investment Analysts Journal Taylor & Francis

The announcement effect of prime rate changes on South African capital markets: a note

van der Berg, LT; Smit, EvdM
Investment Analysts Journal , Volume 28 (49): 6 – Jan 1, 1999
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References (8)

Publisher
Taylor & Francis
Copyright
© 1999 Taylor and Francis Group, LLC
ISSN
2077-0227
eISSN
1029-3523
DOI
10.1080/10293523.1999.11082396
Publisher site
See Article on Publisher Site

Abstract

L T van der Berg and EvdM Smit* The announcement effect of prime rate changes on South African capital markets: a note the effect of the announcement on the markets on 1. INTRODUCTION the day of the announcement; and The prime rate is the business loan rate that commercial the two days following the announcement. banks charge their most creditworthy customers (Goldberg, 1982:277). It also serves as a base rate for Section 2 deals with the related literature, Section 3 with the data and method and Section 4 with the empirical pricing commercial loans to businesses that may not be as creditworthy. These loans, typically, will have a findings. A final section contains the conclusions. floating interest rate. The prime rate does not fluctuate very often and when it does, it does so in discrete 2. LITERATURE REVIEW amounts (0,25 % at a minimum). If one accepts the fact that companies use debt to In South Africa, the prime rate is closely linked to the maintain a certain level of financial leverage, the choice bank rate. The bank rate is the rate at which the of the type of debt becomes important. When financing Reserve Bank finances the banking

Journal

Investment Analysts Journal – Taylor & Francis

Published: Jan 1, 1999

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