Corporate Finance in the Euromarkets and the Economics of Intermediation

E Davis () and Colin Mayer ()

No 570, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper examines bond and syndicated bank finance in the Euromarkets. It uses a comprehensive data bank on Euromarkets to evaluate alternative theories of financial intermediation. A model is estimated that provides a good description of firms' choice of finance. The paper concludes that Euromarkets are best described by control (`transactions banking') rather than commitment (`relationship banking'). Bank and bond markets are not perfect substitutes, however, even for large companies: the financing of high-risk projects requires the involvement of banks. Banks therefore retain a central function and the operation of bank syndicates is crucial to the financing of large corporations.

Keywords: Eurobonds; Financial Intermediation; Syndicated Bank Credit (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 1991-08
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Citations: View citations in EconPapers (6)

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