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Olivier Darmouni

15 June 2022
RESEARCH BULLETIN - No. 96
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Abstract
While historically only very large firms issued in the European corporate bond market, recent years have seen the entry of many new players: small, private, and unrated issuers. Firm-level data show these new players face different game dynamics. They are disconnected from aggregate market movements and still depend heavily on banks. This means hey could potentially affect financial stability and be less responsive to policy interventions.
JEL Code
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
19 May 2022
WORKING PAPER SERIES - No. 2663
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Abstract
Using newly available micro-data on public and private firms, this paper documents five facts about the rise of bond financing in the euro area through the lens of new and small issuers. (1) Recent new issuers are typically small, private, and unrated; (2) bond spreads of unrated issuers are around the investment-grade threshold; (3) holdings of traditional ‘buy-and-hold’ bond investors are small for unrated and smaller issuers, while financial intermediaries and households are large investors; (4) these investors were as flighty as mutual funds during the March 2020 turmoil; (5) the subsequent bond issuance wave was restricted to large rated firms, with other issuers returning to the loan market. These facts imply that these issuers are largely disconnected from the aggregate bond market and still significantly dependent on intermediaries.
JEL Code
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy