The Impact of an Emerging European Corporate Bond Market on Corporate Governance

Abstract

Corporate debt and equity are two main forms of financing that give companies an opportunity to access external capital they need for investment and growth. This chapter examines the European corporate funding market and highlighs the needs for capital in refinancing maturing loans in the coming years and the possible impacts of Basel III on banks' capital needs. The chapter discusses the need for non-bank debt funding and loan contracting considering banks would have a decreasing share in corporate funding in Europe and equity markets would not be able to bridge this gap. It also addresses the corporate governance aspects of debt contracts which have the potential to exert positive influence on the management of a company for value creation.