The International Financial Markets as a Source of Funding for Greek Non-Financial Corporations

Abstract

Following the Global Financial Crisis, bank lending to euro-area non-financial corporations (NFCs) has been, to a large extent, substituted by market financing. In Greece the market financing channel for NFCs has been activated since the end of 2012; by the end of 2014 bonds issued by large and resilient Greek NFCs, in international markets, amounted to more than 6 billion euros. An index is constructed, for the purposes of monitoring the developments in the market for Greek corporate bonds; the methodology of constructing the index is presented in the present article (name: Bank of Greece “GR NFC bond index”, Bloomberg ticker: BOGGRNFC). With the use of the index, I examine the drivers of the Greek corporate bond yields, by means of cointegration analysis with structural breaks. The findings indicate that up until October 2014 Greek corporate bonds were significantly affected by factors affecting corporate bonds belonging to the investment grade, from other euro-area countries. However, this cointegration relationship is found to be subject to structural changes associated to changes in investor confidence towards the Greek economy.

Keywords: Corporate bonds, non-financial corporations, market financing, bond index, Greek debt crisis

JEL Classification: E44, F36, G32