MEZZANINE FINANCING INSTRUMENTS IN COMPARISON TO THE CLASSIC FINANCING SOURCES

Libena Tetrevova,Jan Svedik

doi:10.3846/bme.2018.2205

Abstract

The paper deals with innovated financing in the form of mezzanine financing instruments (sources). The authors aimed to identify, characterize, and assess mezzanine financing instruments in comparison to the classic corporate financing sources. Mezzanine financing represents an innovated form of financing interconnecting the features of equity and debt. The paper specifies the sources and characterizes and assesses pros and cons of each of them. Subsequently, it presents an overall evaluation of mezzanine financing instruments in comparison to the selected equity and debt financing sources. This evaluation was performed on the basis of 14 set criteria using a binary scale.

Highlights

In the today’s demanding economic world conditions, where businesses are threatened by strengthening competitors, especially from Asian countries, where the growing public budget deficits result in the growing tax burden of all economic entities, utilization of unconventional economic tools, procedures and practices is a prerequisite for the prosperity and future existence of businesses
The study shows that equity capital together with equity mezzanine is connected with a larger number of advantages compared to debt capital and debt mezzanine
There is no substantial difference between the advantages of mezzanine and classic equity or debt financing sources

Summary

Introduction

In the today’s demanding economic world conditions, where businesses are threatened by strengthening competitors, especially from Asian countries, where the growing public budget deficits result in the growing tax burden of all economic entities, utilization of unconventional economic tools, procedures and practices is a prerequisite for the prosperity and future existence of businesses. Some mezzanine financing sources were first used in the USA as early as in the 80’s of the 20th century and in Europe in the 90’s, they still have not seen broad utilization in a number of countries, see more e.g. in (Amon & Dorfleitner, 2013; Dec & Masiukiewicz, 2017; Knežević, Ljumović, & Pavlović, 2015; Sazanov et al, 2016; Svedik & Tetrevova, 2014b).

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Discussion

Conclusion