First-Time Corporate Bond Issuers in Italy

Abstract

The paper looks at the characteristics of Italian non-financial firms that accessed the bond market for the first time between 2002 and 2013. The results of logit estimations indicate that first-time bond issuers are significantly larger and more frequently listed on the stock exchange than firms not issuing bonds. We also find that their decision to enter the bond market stems from a need to finance growth, especially where internal resources are limited, and to rebalance maturity mismatches between assets and liabilities. Our estimates also suggest that the sharp drop in the number of small issuers during the economic crisis is partly due to increased risk aversion on the part of market investors. Based on the econometric results, we estimate that the non-issuers include some 450-650 firms whose characteristics are very similar to those of companies that have begun to issue bonds in the last decade. These estimates are surrounded by considerable uncertainty due to the evolution of the macroeconomic context as well as the effects of new rules on minibonds.

Bank Credit and Market-based Finance for Corporations: The Effects of Minibond Issuances

“…The results may be explained by the improved bargaining power with the insider banks in setting credit conditions. It may be partially due to the changes in debt composition in favor of long-term debt, which might have enhanced the debt sustainability of issuer firms, in line with previous evidence that shows how bond issuances were used to reduce maturity mismatches between assets and liabilities (Accornero et al, 2015).…”

“…Among the economic factors, small corporations face significantly higher funding costs on capital markets, due to their opaqueness that increase the informational asymmetries between investors and ECB Working Paper Series No 2508 / December 2020 issuers. Moreover, the recourse to capital markets by Italian SMEs may have been hampered by the limited presence of specialized domestic investors, interested in investing in corporate debt instruments Nigro, 2018 and2015). At the same time, given the national fragmentation of capital markets in the EU, it is unlikely that the debt instruments of Italian SMEs could be purchased by other EU investors.…”

Bank Credit and Market-Based Finance for Corporations: The Effects of Minibond Issuances

“…After the IPO, lending rates decreased particularly for firms with more intense firmbank relationships: by reducing the information asymmetries for the other banks not previously involved in a firm-bank relationship, the IPO decreased the cost of switching banks for the new publicly listed firm. Accornero et al (2015) show that, besides reputational aspects, two important drivers of the decision to enter the bond market are the needs to finance growth and to reduce maturity mismatches between assets and liabilities.…”

Asymmetric Information in Corporate Lending: Evidence from SME Bond Markets

“…where , , is bank j's share of firm i's total bank fixed-term loans outstanding at time t. 15 For a related analysis, see Accornero et al (2015).…”