Citation

Discussion Paper Details

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Title: Corporate Finance in the Euromarkets and the Economics of Intermediation

Author(s): E Philip Davis and Colin Mayer

Publication Date: August 1991

Keyword(s): Eurobonds, Financial Intermediation and Syndicated Bank Credit

Programme Area(s): Applied Macroeconomics

Abstract: This paper examines bond and syndicated bank finance in the Euromarkets. It uses a comprehensive data bank on Euromarkets to evaluate alternative theories of financial intermediation. A model is estimated that provides a good description of firms' choice of finance. The paper concludes that Euromarkets are best described by control (`transactions banking') rather than commitment (`relationship banking'). Bank and bond markets are not perfect substitutes, however, even for large companies: the financing of high-risk projects requires the involvement of banks. Banks therefore retain a central function and the operation of bank syndicates is crucial to the financing of large corporations.

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Bibliographic Reference

Davis, E and Mayer, C. 1991. 'Corporate Finance in the Euromarkets and the Economics of Intermediation'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=570