Abstract
Economic theory argues that developed financial systems foster economic growth by promoting efficiency in the allocation of resources to productive units. However, the evidence from the flow of funds in the last 15 years suggests that in countries with booming financial sectors innovations in intermediation activity, rather than influencing firms’ capital structure, have promoted self-referential dynamics, as the overall expansion in size has been mainly due to the surge in claims and obligations between financial firms. The evidence of the increased interconnectedness within the financial system has several implications for financial stability.
We would like to thank Antonio De Socio and Cristiana Rampazzi for precious research assistance. The opinions expressed are solely our own and do not necessarily reflect those of the Bank of Italy.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
The indicator proposed by Levine has bank credit to the private sector as the numerator. Slightly changing the aggregate used does not, however, alter the relative position of the countries considered.
- 2.
On households see Chap. 4 by Bartiloro et al.
- 3.
Data for the US are not comparable as they do not include buyouts.
- 4.
Other intermediaries with a key role in the development of non-financial firms are those supporting them for the issuance of bonds and their subsequent placement on the market. For example, between 2000 and 2009, among the top 20 lead managers in bond placement there was just one Italian intermediary (Unicredit, ranking 18th) and only 3% of bonds placed on the euro-market were related to an Italian intermediary. The absence of intermediaries specialized in bond placement increases the cost of issuance for non-financial firms; this helps to explain the small amount of private bonds in Italy.
- 5.
On this issue see also Chap. 5 by Semeraro.
- 6.
On this issue see also Chap. 9 by Infante et al.
- 7.
Financial debt differs from total financial liabilities in that it includes only loans and securities other than shares.
- 8.
A recent study focusing on Italian non-financial firms’ bond issues shows that the differences with respect to the more developed Anglo-Saxon markets is due in large part to the underdevelopment of the stock exchange, which attracts a small number of non-financial corporations (De Socio et al. 2010). Indeed, when analysing bonds issued by listed companies (measured with respect to total financial debt) these differences almost disappear, confirming that bonds are usually issued only by listed firms because of the fixed costs of entering the financial markets. Another important determinant of small bond issues is the lack of an adequate network of institutional investors: on the supply side, the absence of specialized intermediaries for their placement may increase the cost, while on the other side, a limited range of institutional investors, which are the main buyers of this type of securities, keeps demand low.
References
Adrian T, Shin HS (2010) Liquidity and leverage. J Finan Intermediation 19(3):418–437
Adrian T, Shin HS (2009) The shadow banking system: implications for financial regulation. Federal Reserve Bank of New York Staff Reports, 382
Allen F, Gale D (2001) Comparing financial systems. MIT Press, Cambridge
Bartiloro L, De Bonis R, Generale A, Longhi I (2008) The financial structures of the leading industrial countries: a medium-term analysis. In: Financial accounts: history, methods, the case of Italy and international comparisons, Banca d’Italia
Bernanke B (2005) The global savings glut and the U.S. current account deficit, remarks made at the Sandridge lecture, 19 March
Bernanke B (2009) The Federal Reserve’s balance sheet: an update, speech given at the Federal Reserve Board Conference on Key Developments in Monetary Policy, 8 October
Bini Smaghi L (2010) Has the financial sector grown too big? Nomura seminar on the paradigm shift after the financial crisis, Kyoto, 15 April
Brunnermeier M (2009) De-ciphering the credit crisis of 2007. J Econ Perspect 23:77–100
Caballero RJ, Krishnamurthy A (2009) Global imbalances and financial fragility. Am Econ Rev 99(2):584–588
Caballero RJ, Simsek A (2009) Fire sales in a model of complexity. MIT mimeo, July
De Socio A, Finaldi Russo P, Giacomelli S, Guazzarotti G (2010) Perché le imprese italiane emettono meno obbligazioni? Banca d’Italia, mimeo
Fazzari SM, Hubbard RG, Petersen BC (1988) Financing constraints and corporate investment. Brookings Pap Econ Act 141–195
Hordahl P, King M (2008) Developments in repo markets during the recent turmoil. Bank for International Settlements Quarterly Review:59–72
King RG, Levine R (1993) Finance and growth: Schumpeter might be right. Q J Econ 108:717–737
Levine R (2002) Bank-based or market-based financial systems: which is better? NBER WP, No.9138
Myers SC (1984) The capital structure puzzle. J Finance 39:575–592
Pagano M, Roell A, Zechner J (2002) The geography of equity listing: why do companies list abroad? J Finance 57:2651–2694
Palumbo M, Parker J (2009) The integrated financial and real system of national accounts for the United States: does it presage the financial crisis? NBER, January
Rajan R, Zingales L (1998) Financial dependence and growth. Am Econ Rev 88:559–586
Shin HS (2009a) Reflections on Northern Rock, the bank run that heralded the global financial crisis. J Econ Perspect 23:1299–1311
Shin HS (2009b) Securitisation and financial stability. Econ J 119:309–332
Shin HS (2009c) Financial intermediation and the post-crisis financial system. Paper given at the 8th BIS annual conference
Trichet JC (2009) Supporting the financial system and the economy: key ECB policy actions in the crisis, speech given at the conference organized by the Nueva Economìa Fòrum and the Wall Street Journal Europe in Madrid, 22 June
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2012 Springer-Verlag Berlin Heidelberg
About this chapter
Cite this chapter
Bartiloro, L., di Iasio, G. (2012). Financial Sector Dynamics and Firms’ Capital Structure. In: De Bonis, R., Pozzolo, A. (eds) The Financial Systems of Industrial Countries. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-23111-7_6
Download citation
DOI: https://doi.org/10.1007/978-3-642-23111-7_6
Published:
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-23110-0
Online ISBN: 978-3-642-23111-7
eBook Packages: Business and EconomicsEconomics and Finance (R0)