Date of Publication


Document Type

Bachelor's Thesis

Degree Name

Bachelor of Science in Applied Economics major in Financial Economics/ Bachelor of Science in Business Management

Subject Categories



School of Economics

Defense Panel Chair

Angelo A. Unite

Defense Panel Member

Anne Marie L. Go
Madeleine B. Estabillo
Justin Raymond S. Eloriaga


Changes in the interest rate assume a significant role in managing the money supply and ensuring price stability in an economy. The Central Bank sets the main policy interest rate, which is the primary tool to influence the movement of monetary variables, such as short-term market rates, in the economy. Short-term market rates may affect the level of investment of firms, consequently influencing firm growth. However, there are limited studies that specifically discuss policy rates and their effect on the growth of firms. With this, our study investigates the impact of the overnight reverse repurchase rate, the main policy rate set by Bangko Sentral ng Pilipinas, on the growth of non-financial publicly listed firms in the Philippine Stock Exchange.

We utilize growth in assets, growth in sales, and market-to-book ratio as proxies for firm growth. Using the Threshold Fixed-Effects Model, we test for the existence of threshold points and employ the two-step System General Method of Moments to analyze their relationship with the overnight reverse repurchase rate throughout 2003-2019. Our study finds a significant single threshold point of 6.75% for the overnight reverse repurchase rate using the market-to-book ratio as a measure of firm growth. However, we failed to find a significant threshold point using growth in assets and growth in sales as proxies for firm growth. The results of the two-step System General Method of Moments show a significant and negative relationship between overnight reverse repurchase rate and firm growth using proxies, growth in assets and market-to-book ratio. This suggests that the market value and assets of firms are likely to increase when the overnight reverse repurchase rate (RRP) decreases. Based on the significant threshold regimes of the overnight reverse repurchase rate for the case of market-to-book ratio, we find that the regimes are significant and negatively correlated with firm growth. Specifically, when overnight RRP is less than 6.75%, a decrease in RRP towards 0 increases firm growth by a greater magnitude than when the overnight RRP is higher than 6.75%.

Abstract Format






Physical Description

69 leaves


Stock repurchasing--Philippines

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Available for download on Saturday, June 03, 2023