Bank credit and market-based finance for corporations: the effects of minibond issuances

Steven Ongena, Sara Pinoli, Paola Rossi and Alessandro Scopelliti

No 2508, Working Paper Series from European Central Bank

Abstract: We study the effects of the diversification of funding sources on the financing conditions for firms. We exploit a regulatory reform which took place in Italy in 2012, i.e., the introduction of “minibonds”, which opened a new market-based funding opportunity for unlisted firms. Using the Italian Credit Register, we investigate the impact of minibond issuance on bank credit conditions for issuer firms, both at the firm-bank and firm level. We compare new loans granted to issuer firms with new loans concurrently granted to similar non-issuer firms. We find that issuer firms obtain lower interest rates on bank loans of the same maturity than non-issuer firms, suggesting an improvement in their bargaining power with banks. In addition, issuer firms reduce the amount of used bank credit but increase the overall amount of available external funds, pointing to a substitution with bank credit and to a diversification of corporate funding sources. Studying their ex-post performance, we find that issuer firms expand their total assets and fixed assets, and also raise their leverage. JEL Classification: G21, G23, G32, G38

Keywords: bank credit; capital markets; loan pricing; minibonds; SME finance (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-ban, nep-bec, nep-cfn, nep-cwa and nep-eec
Note: 2396712
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Bank credit and market-based finance for corporations: the effects of minibond issuances (2021)
Working Paper: Bank Credit and Market-Based Finance for Corporations: The Effects of Minibond Issuances (2021)
Working Paper: Bank Credit and Market-based Finance for Corporations: The Effects of Minibond Issuances (2021)
Working Paper: Bank Credit and Market-based Finance for Corporations: The Effects of Minibond Issuances (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20202508

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