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The rise of bond financing in Europe: five facts about new and small issuers

Author

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  • Darmouni, Olivier
  • Papoutsi, Melina
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 Classification: G21, G32, E44

Suggested Citation

  • Darmouni, Olivier & Papoutsi, Melina, 2022. "The rise of bond financing in Europe: five facts about new and small issuers," Working Paper Series 2663, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20222663
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    References listed on IDEAS

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    Cited by:

    1. Darmouni, Olivier & Papoutsi, Melina, 2022. "Europe's growing league of small corporate bond issuers: new players, different game dynamics," Research Bulletin, European Central Bank, vol. 96.
    2. Meinerding, Christoph & Schüler, Yves S. & Zhang, Philipp, 2023. "Shocks to transition risk," Discussion Papers 04/2023, Deutsche Bundesbank.
    3. Kubitza, Christian, 2021. "Investor-driven corporate finance: Evidence from insurance markets," ICIR Working Paper Series 43/21, Goethe University Frankfurt, International Center for Insurance Regulation (ICIR).
    4. Alessandra Iannamorelli & Stefano Nobili & Antonio Scalia & Luana Zaccaria, 2024. "Asymmetric Information and Corporate Lending: Evidence from SME Bond Markets," Review of Finance, European Finance Association, vol. 28(1), pages 163-201.
    5. Joost Bats & Giovanna Bua & Daniel Kapp, 2023. "Physical and transition risk premiums in euro area corporate bond markets," Working Papers 761, DNB.
    6. Kaldorf, Matthias & Wicknig, Florian, 2021. "Risky Financial Collateral, Firm Heterogeneity, and the Impact of Eligibility Requirements," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242413, Verein für Socialpolitik / German Economic Association.
    7. Nina Boyarchenko & Leonardo Elias, 2023. "The Good, the Bad, and the Ugly of International Debt Market Data," Staff Reports 1074, Federal Reserve Bank of New York.
    8. Martijn Boermans, 2022. "A literature review of securities holdings statistics research and a practitioner’s guide," Working Papers 757, DNB.

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    More about this item

    Keywords

    bond investors; corporate bond market; debt structure; disintermediation; ECB; financial fragility; monetary policy; quantitative easing;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other 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

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