The Rise of Bond Financing in Europe

63 Pages Posted: 8 Feb 2021 Last revised: 1 Jun 2021

See all articles by Olivier Darmouni

Olivier Darmouni

Columbia University - Columbia Business School

Melina Papoutsi

European Central Bank (ECB) - Directorate General Research

Date Written: December 13, 2020

Abstract

Using large panel data of public and private firms, this paper dissects the aggregate growth of bond financing in the Euro Area. It considerably broadened firms' access to funding, but can also lead to new risks. The composition of bond issuers has shifted, with the entry of many smaller and riskier issuers in recent years. New issuers invest and grow, leading to higher leverage and interest rates. Moreover, holdings of stable `buy-and-hold' bond investors are large in aggregate but small for weaker issuers. Finally, the majority of firms downgraded in the 2020 crisis were small private firms that recently entered the bond market.

Keywords: Corporate bond market, debt structure, disintermediation, ECB, monetary policy, quantitative easing, bond investors

JEL Classification: G21, G32, E44

Suggested Citation

Darmouni, Olivier and Papoutsi, Melina, The Rise of Bond Financing in Europe (December 13, 2020). Available at SSRN: https://ssrn.com/abstract=3748002 or http://dx.doi.org/10.2139/ssrn.3748002

Olivier Darmouni (Contact Author)

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Melina Papoutsi

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

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

HOME PAGE: http://https://www.melinapapoutsi.com/

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