The Euro and Corporate Financing before the Crisis
45 Pages Posted: 10 Feb 2011 Last revised: 14 Mar 2014
Date Written: March 11, 2014
We study the financing policies of European public corporations prior to the euro crisis. Using data from eleven euro countries and a control group of five other European countries over 1991-2006, we show that non-financial firms from euro countries with previously weak currencies considerably increased their debt financing after the introduction of the euro. The results are stronger for large firms, firms dependent on external financing and for the latter part of the post-euro time period. Overall, the results support the hypothesis that the supply of capital increased following the introduction of the euro.
Keywords: euro, financial integration, external financing, debt financing, supply of capital, financial dependence
JEL Classification: F33, F36, G32
Suggested Citation: Suggested Citation