The Euro and Corporate Financing before the Crisis

45 Pages Posted: 10 Nov 2015 Last revised: 6 May 2016

See all articles by Arturo Bris

Arturo Bris

IMD International; European Corporate Governance Institute (ECGI); Yale University - International Center for Finance

Yrjo Koskinen

Haskayne School of Business, University of Calgary

Mattias Nilsson

U.S. Securities and Exchange Commission

Multiple version iconThere are 4 versions of this paper

Date Written: July 10, 2014

Abstract

Private sector borrowing has been identified as a major factor behind the euro crisis. We study the contribution of non-financial public corporations to this finding. Using data from eleven euro countries and a control group of five other European countries over 1991-2006, we show that firms from euro countries with previously weak currencies considerably increased their debt financing after the introduction of the euro. Results are stronger during the latter half of our sample period, for large firms and for firms dependent on external financing. These results support the hypothesis that the supply of capital increased in the euro area before the crisis.

Keywords: euro, external financing, debt financing, leverage, supply of capital, financial dependence, financial fragility

JEL Classification: F33, F36, G32

Suggested Citation

Bris, Arturo and Koskinen, Yrjo J and Nilsson, Mattias, The Euro and Corporate Financing before the Crisis (July 10, 2014). Journal of Financial Economics (JFE), Vol. 114, No. 3, 2014, Available at SSRN: https://ssrn.com/abstract=2687284

Arturo Bris

IMD International ( email )

Ch. de Bellerive 23
P.O. Box 915
CH-1001 Lausanne
Switzerland

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Yale University - International Center for Finance ( email )

Box 208200
New Haven, CT 06520
United States

Yrjo J Koskinen (Contact Author)

Haskayne School of Business, University of Calgary ( email )

SH 154, 2500 University Drive NW
Calgary, Alberta T2N 1N4
Canada
+1-403-220-5540 (Phone)

HOME PAGE: http://contacts.ucalgary.ca/info/ha/profiles/1-7257931

Mattias Nilsson

U.S. Securities and Exchange Commission ( email )

United States Securities and Exchange Commission
100 F Street NE
Washington, DC 20549
United States

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