Natural Bank Reliance

Hannah Winterberg

No 2025/115, IMF Working Papers from International Monetary Fund

Abstract: The higher aggregate prevalence of loan over bond funding in Europe is not only driven by the well-documented differences in financial market settings but also strongly shaped by different firm characteristics. The European economy is more fragmented than the U.S. economy, and thus features a different firm distribution in terms of size and collateral availability. I estimate that if all European firms had access to a financial market like the U.S. market, their aggregate bond funding share would remain significantly smaller. This counterfactual suggests a limited potential for European corporate bond markets in the short and medium term.

Keywords: Corporate bond markets; bank reliance; firm size distribution; euro area. (search for similar items in EconPapers)
Pages: 48
Date: 2025-06-13
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