Are Euro-Area Corporate Bond Markets Irrelevant? The Effect of Bond Market Access on Investment

Conor T. Howells and Bastian von Beschwitz
Additional contact information
Bastian von Beschwitz: https://www.federalreserve.gov/econres/bastian-von-beschwitz.htm

No 1176, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We compare how bond market access affects firms? investment decisions in the United States and the euro area. Having a bond rating enables US corporations to invest more and undertake more acquisitions. In contrast, in the euro area, bond ratings have no effect on investment decisions. Similarly, firms with bond ratings have higher leverage in the United States, but not in the euro area. This difference may be due to euro-area firms getting sufficient financing from banks. Consistent with this explanation, euro-area bond ratings became more relevant for investment after the banking crisis of 2008, when banks reduced their lending to firms.

Keywords: Mergers and acquisitions; Bond ratings; Investment; Financing constraints (search for similar items in EconPapers)
JEL-codes: G31 G32 G34 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2016-06-30
New Economics Papers: this item is included in nep-cfn, nep-eec and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.federalreserve.gov/econresdata/ifdp/2016/files/ifdp1176.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1176

DOI: 10.17016/IFDP.2016.1176

Access Statistics for this paper

More papers in International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().