Convergence of of corporate finance patterns in Europe

A. Mullineux, V. Murinde, R. Sensarma

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We investigate the pattern of corporate financing through bank loans, bond markets and stock markets in the European Union (EU). Specifically, we examine whether the European economies are converging towards a market-oriented or a bank-oriented financial system. Panel unit root tests and GMM regressions are applied to flow of funds data for eight EU countries over the period 1972- 2004. We find that the pattern of corporate financing in the EU mimics elements of the pecking order theory of financing choices. Furthermore, the EU financial system seems to be converging on a variant of the Anglo-Saxon model, with heavy reliance on internal financing and financing from the capital market.
Original languageEnglish
JournalEconomic Issues
Issue number2
Publication statusPublished - 2010


  • corporate financing
  • EU
  • GMM
  • financial convergence


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