External funding for US companies: Supplementary to loans and securities, or Alternative? (Part 1)
overview : “Multiple mediation” (Greenspan 2000)
Financing through corporate loans and corporate bonds facilitates the flow of external funds. Holmstrom and
Tirole (1997) emphasizes complementarity. Bank financing and consistent monitoring for most companies Essential for bond raising.
Their model-based econometric studies are consistent with:
Averages over time and during the financial crisis, and complementarity across both levels
Volatility. This means that 'multiple options' may not be an effective buffer for bank lending.
The crisis and the resulting supply-side disruption of bank lending can affect real activity. there is
It has important implications for regulation, especially Basel II.