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

72 Pages Posted: 16 Apr 2021 Last revised: 10 Aug 2021

See all articles by Steven Ongena

Steven Ongena

University of Zurich - Department of Banking and Finance; NTNU Business School; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR)

Sara Pinoli

Bank of Italy

Paola Rossi

Bank of Italy

Alessandro Scopelliti

European Central Bank (ECB) - Directorate General Economics; University of Zurich - Department of Banking and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: February 12, 2021

Abstract

We study the effects of diversifying funding sources on the financing conditions for firms. We exploit a regulatory reform that 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 do, 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.

Keywords: bank credit, capital markets, minibonds, loan pricing, SME finance

JEL Classification: G21, G23, G32, G38

Suggested Citation

Ongena, Steven R. G. and Ongena, Steven R. G. and Pinoli, Sara and Rossi, Paola and Scopelliti, Alessandro, Bank Credit and Market-Based Finance for Corporations: The Effects of Minibond Issuances (February 12, 2021). Bank of Italy Temi di Discussione (Working Paper) No. 1315, Swiss Finance Institute Research Paper No. 21-55, Available at SSRN: https://ssrn.com/abstract=3827480 or http://dx.doi.org/10.2139/ssrn.3827480

Steven R. G. Ongena

NTNU Business School ( email )

Norway

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

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Sara Pinoli

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Paola Rossi (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Alessandro Scopelliti

European Central Bank (ECB) - Directorate General Economics ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

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

Schönberggasse 1
Zürich, 8001
Switzerland

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