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.
|Publication status||Published - 2010|
- corporate financing
- financial convergence