Patterns of Corporate Financing and Financial System Convergence in Europe

13 Pages Posted: 16 Sep 2004

See all articles by Victor Murinde

Victor Murinde

University of London - School of Oriental and African Studies (SOAS)

Juda Agung

University of Birmingham - Department of Economics

Andy W. Mullineux

University of Birmingham

Abstract

The paper investigates the possibility of convergence in the European Union (EU) in terms of the patterns of corporate financing by banks, bond markets, and stock markets; and in the context of whether the economies are converging towards an Anglo-Saxon (capital-market-oriented) or a continental (bank-oriented) financial system. GMM estimation of a dynamic fixed-effects model is implemented to test for conditional and unconditional convergence using a panel of flow of funds data for the period 1972-1996 for seven EU member countries. It is found that the pattern of corporate financing is consistent with the pecking order theory of financing choices. Overall, the evidence suggests convergence of the EU financial systems on a variant of the Anglo-Saxon model, depicting heavy reliance on internal financing as well as direct financing via equity and bond markets, while bank debt is becoming relatively less important.

Suggested Citation

Murinde, Victor and Agung, Juda and Mullineux, Andy W., Patterns of Corporate Financing and Financial System Convergence in Europe. Review of International Economics, Vol. 12, No. 4, pp. 693-705, September 2004. Available at SSRN: https://ssrn.com/abstract=591391

Victor Murinde (Contact Author)

University of London - School of Oriental and African Studies (SOAS) ( email )

Thornhaugh Street
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HOME PAGE: http://https://www.soas.ac.uk/staff/staff120377.php

Juda Agung

University of Birmingham - Department of Economics ( email )

Economics Department
Birmingham, B15 2TT
United Kingdom
0121-4147701 (Phone)

Andy W. Mullineux

University of Birmingham ( email )

Birmingham Business School
University House
Birmingham, B15 2TT
United Kingdom

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