The long-term and short-term effects of interest rate volatility on corporate bankruptcy risk: An industry and supply chain perspective.

ABSTRACT: While higher interest rates increase the cost of credit financing for businesses, this study finds that the direct impact of this traditional credit transmission mechanism on corporate bankruptcy risk is limited. Instead, our research reveals that changes in corporate behavior induced by rising debt financing costs are the root cause of bankruptcy risk. In the short term, an increase in interest rates drives businesses to substitute supply chain financing for credit financing in pursuit of profit maximization. This mismatch of short-term debt and long-term investments undermines the sustainability of the supply chain, ultimately reducing financial security-sacrificing safety for profitability. In the long term, higher interest rates exacerbate the overcapacity problem in industries, increa

SUBMITTER: Chen L 

PROVIDER: S-EPMC11805371 | biostudies-literature | 2025

REPOSITORIES: biostudies-literature