Bank Credit and Market-Based Finance for Corporations: The Effects of Minibond Issuances

64 Pages Posted: 18 Dec 2020

See all articles by Steven Ongena

Steven Ongena

University of Zurich

Sara Pinoli

Bank of Italy

Paola Rossi

Bank of Italy

Alessandro Scopelliti

KU Leuven, Department Accounting, Finance and Insurance; University of Zurich - Department of Banking and Finance

Date Written: December, 2020

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

Suggested Citation

Ongena, Steven and Pinoli, Sara and Rossi, Paola and Scopelliti, Alessandro, Bank Credit and Market-Based Finance for Corporations: The Effects of Minibond Issuances (December, 2020). ECB Working Paper No. 20202508, Available at SSRN: https://ssrn.com/abstract=3751354 or http://dx.doi.org/10.2139/ssrn.3751354

Steven Ongena (Contact Author)

University of Zurich

Rämistrasse 71
Zürich, CH-8006
Switzerland

Sara Pinoli

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Paola Rossi

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Alessandro Scopelliti

KU Leuven, Department Accounting, Finance and Insurance ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

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