98 Pages Posted: 18 Sep 2013

Date Written: September 17, 2013

Abstract

Up until now, there has been a great deal of research performed on capital markets within the Euro-Zone but none at all from an industry perspective. Furthermore, no comparisons in this regard have been made with other regions of the world, namely Asia and North America (U.S. & Canada). This paper provides a foundation for future research by examining the differences between individual industries within the Euro-Zone as to historical preference of syndicated loans versus corporate bonds.

Data was acquired from Dealogic for the period from January 1, 1999 (introduction of the euro as a financial market currency) and December 31, 2012 for all examined regions (Euro-Zone, Asia and U.S. & Canada). Additionally, maturities and issuance sizes of both instruments were analyzed on a regional basis to examine whether or not there were similarities between three specific time periods (1999-2006, 2007 and 2008-2012) within each region and also between the regions.

Following analysis of issuance sizes and maturities, those industries that are typically involved in infrastructure projects (primarily telecommunications and utility & energy) show a greater preference for bonds, which characteristically have longer maturities than syndicated loans, than other industries. Syndicated loans, however, largely remain the preferred financing instrument across the globe, although there are some differences between individual regions.

With respect to the analysis undertaken on a regional basis, there is evidence pointing towards a state of “new normality” within Euro-Zone bond markets. Prior to the financial crisis of 2007, European companies relied heavily on bank financing of one form or another to meet their needs. The financial crisis and the aftermath thereof brought a great deal of turmoil and restriction in lending practices to capital markets, forcing many European companies to bond markets for the first time. Within the statistical evidence it is clear that a trend has emerged that shows a growing bond market within the Euro-Zone that could likely be a direct result of behavior adopted in 2007 (the definition of this state of “new normality”).

While this paper is merely a foundation for future research, it does provide some interesting insights into financing choices among individual industries across the globe and also into the changes seen on Euro-Zone capital markets as a result of the recent financial crisis. The material is wide-reaching and highly complex and most certainly requires further research on all aspects presented here.