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The Role of Corporate Bonds for Finance in Austria

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  • Walter Waschiczek

    ()
    (Oesterreichische Nationalbank, Economic Analysis Division)

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    Abstract

    With corporate bond issuance having grown at a fast pace in Austria in recent years, bonds have become firmly established as a pillar of the financing structure of the domestic corporate sector. More and more issuers are smaller firms, and they come from a broad range of industries. Bond financing allows companies to diversify their financing sources and to broaden their creditor base beyond the banking industry. Rather than drive up corporate debt, bonds have become an alternative to bank loans as a borrowing instrument. Compared with loans, bonds allow companies to borrow money over longer horizons, but high upfront costs make this instrument more attractive for companies that need to finance large volumes. Moreover, bonds are not equally appropriate for all financing requirements, which is why they will never fully replace loans in the long term. Finally, more stringent requirements implicitly apply to the quality of a company's credit ratings when companies intend to issue bonds than when they apply for a bank loan. So far, there have been very few cases of bond defaults in Austria.

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    Bibliographic Info

    Article provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Monetary Policy & the Economy.

    Volume (Year): (2004)
    Issue (Month): 4 ()
    Pages: 39–52

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    Handle: RePEc:onb:oenbmp:y:2004:i:4:b:3

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    Keywords: Corporate bonds;

    References

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    1. de Bondt, Gabe, 2002. "Euro area corporate debt securities market: first empirical evidence," Working Paper Series, European Central Bank 0164, European Central Bank.
    2. Peree, Eric & Steinherr, Alfred, 2001. "The Euro And Capital Markets: A New Era," Economic and Financial Reports, European Investment Bank, Economics Department 2001/3, European Investment Bank, Economics Department.
    3. E. P. Davis, 2001. "Multiple Avenues of Intermediation, Corporate Finance and Financial Stability," IMF Working Papers, International Monetary Fund 01/115, International Monetary Fund.
    4. João A. C. Santos & Kostas Tsatsaronis, 2003. "The cost of barriers to entry: evidence from the market for corporate euro bond underwriting," BIS Working Papers, Bank for International Settlements 134, Bank for International Settlements.
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