Working Paper: CEPR ID: DP16693
Authors: Steven Ongena; Sara Pinoli; Paola Rossi; Alessandro Diego Scopelliti
Abstract: Does a diversification of funding sources affect the financing conditions for firms? To answer this question we study a regulatory reform which allowed unlisted firms to issue minibonds. Using the Italian Credit Register, we compare new loans granted to issuer firms with new loans concurrently granted to similar non-issuer firms. We find that issuer firms obtain lower interest rates on bank loans of the same maturity than non-issuer firms, suggesting an improvement in their bargaining power with banks. Issuer firms also reduce the amount of used bank credit, expand their total and fixed assets, and raise their leverage.
Keywords: bank credit; capital markets; minibonds; loan pricing; SME finance
JEL Codes: G21; G23; G32; G38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Minibond issuance (G12) | Lower interest rates on bank loans (G21) |
| Minibond issuance (G12) | Reduction in reliance on bank credit (G21) |
| Minibond issuance (G12) | Increase in total financial debt (F65) |
| Lower interest rates on bank loans (G21) | Improved bargaining power of issuer firms (G32) |
| Minibond issuance (G12) | No significant increase in overall financing costs (G32) |
| Larger amounts of minibonds issued (G12) | Better financing conditions (G32) |
| Improved financing conditions (G19) | No significant effects on firms' turnover and profitability (L25) |