Graduation Year

Spring 2013

Document Type

Open Access Senior Thesis

Degree Name

Bachelor of Arts



Reader 1

Matthew Magilke

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Rights Information

© 2013 Timothy Park


This paper examines the interest rate sensitivity of Business Development Companies (BDCs). The results of this study are intended to lend insight to investors about the viability and timing of investments in BDCs during the business cycle. Similar to previous research that has examined interest rate sensitivity of financial companies, this paper employs a two-factor market model to see whether BDCs are responsive to changes in short, medium, and long-term interest rates. My particular interest in BDCs is motivated by their unique asset-liability structure and requirements, as well as their high dividend payouts. Monthly data is drawn from the period ranging from January 2004 through December 2012. Using a sample of 30 BDCs, I estimate the sensitivity of BDC stock returns to stock market and interest rate changes in general. I then proceed to test whether size and Small Business Investment Company (SBIC) licensure status affect these sensitivities.