Impact of monetary policy surprises on corporate debt composition: evidence from SET100 & MAI

Abstract

This study examines the impact of monetary policy surprises (MPS) on corporate debt composition in Thailand using a Panel Vector Autoregression (PVAR) framework. The analysis covers 204 listed firms from the SET100 and MAI, excluding the financial sector, from 2007 Q1 to 2024 Q4. Monetary policy surprises are measured as deviations of Bank of Thailand policy rate decisions from Bloomberg consensus forecasts. The results support the bank lending channel: an unexpected monetary tightening lead to a significant and persistent increase in bank borrowing, consistent with a precautionary credit line drawdown mechanism. In contrast, bond issuance shows no significant response to monetary policy shocks, suggesting structural insulation of the Thai corporate bond market. Bond market access does not reduce the bank borrowing response, contradicting the substitution hypothesis. Crisis-period analysis reveals that the precautionary drawdown mechanism intensifies during periods of uncertainty, particularly during the COVID-19 era. Overall, monetary policy transmission in Thailand operates primarily through committed bank credit facilities rather than shifts in debt composition.