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

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.