Market Financing of Mid-Size Companies: State of Play and Key Drivers

The emergence of new issuers among medium-sized enterprises are a new development of financial markets. These developments are driven by a mix of external factors (low interest rates for long and prudential reforms in the banking sector and in the insurance sector) and the rise of alternative financing options (non-banking private financing) that have changed the terms of the previous trade-off between public (market) financing and bank-based financing. An examination of the drivers of the trade-off enables us to characterize the population of new and potential new issuers that could benefit from private financing. Going forward, the sustainability of the widening of financing options for medium-sized enterprises rests on the robustness of solutions that contributed to changing the terms of the trade-off, in particular with respect to information, analytical and monitoring abilities of investors, practices underpinning the confidentiality of some of the information, risk management and ability to restructure when needed.