Structure of Firms and Access to Financial Markets : The EU Case

This paper explores how the structure of EU non-financial corporation's in terms of size and activity specialisation can influence their financing mix and, particularly, the use of capital markets as a source of funding.Significant differences in the structure and size of firms are observed across EU countries and when comparing the EU with the US. Indeed, data indicate that the large EU firms are not as big as their US peers. The funding structure of firms differs also significantly across the Atlantic: US firms tend to use capital markets to a larger extent than EU firms.A combination of regulatory restrictions in banking activities with a series of conditions facilitating the appearance of large firms (e.g. historical developments, human geography and regulatory thresholds) seem to explain the development of capital markets in the US as an answer to the funding needs of large firms.Some European firms have been constrained in accessing finance. The lessons of this paper could be useful for development alternative sources of funding. Indeed, given that the development of capital markets seems to come hand in hand with the structure of firms, a policy aiming at developing capital markets could be reinforced or complemented by a policy targeting the size and structure of firms