The role of bank lending tightening on corporate bond issuance in the eurozone

  • This paper empirically tests the role of bank lending tightening on non-financial corporate (NFC) bond issuance in the eurozone. By utilizing a unique data set provided by the ECB Bank Lending Survey, we capture the "pure" credit supply effect on corporate external financing. We find that tightened credit standards positively affect the NFC bond issuance: A 1pp increase in banks reporting considerable tightening on loans leads to around a 7% increase in firms' bond issuance in the eurozone. Focusing on a spectrum of aspects contributing to bank credit tightening, we document that banks' balance sheet constraints, as well as the perception of risk lead to significantly higher NFC bond issuance. In addition, we show that stricter lending conditions, such as wider margins, higher collateral requirements and covenants significantly increase NFC bond issuance volumes too. Furthermore, the impact of bank credit tightening on firms' bond issuance is particularly observable in core eurozone countries and not in peripheral countries. This is partially due to the underdeveloped of debt capital markets in the peripheral countries.

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Metadaten
Author:Orcun Kaya, Lulu Wang
URN:urn:nbn:de:hebis:30:3-338337
URL:https://www.ifk-cfs.de/2415.html
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 456
Series (Serial Number):CFS working paper series (456)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Language:English
Year of Completion:2014
Date of first Publication:2014/04/28
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2014/05/28
Tag:Corporate Financing; Debt Securities; Euro Area; Structural Change
Page Number:56
Note:
First Draft July 2013; this version 28 April 2014
HeBIS-PPN:349979510
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Sammlungen:Universit├Ątspublikationen
Licence (German):License LogoDeutsches Urheberrecht