Implications of post-crisis banking regulation after 2007 on the debt capital structures of German companies and corporate banking business models

Table of Contents

1. Introduction

1.1. Background and Motivation

1.2. Aim and Objectives

1.3. Chosen Approach

1.4. Structure of the Study

2. Review of Literature

2.1. Debt Capital Markets and Structures in Germany

2.1.1. Universal and Economic Reflections in View of Financing Decisions

2.1.2. Funding Considerations on Business Level

2.1.3. Recent Developments in German Debt Markets

2.2. Impact of the Basel III Regulations on Financing Terms

2.2.1. Key Contents of the Basel III Accords

2.2.2. Effects of Basel III on the Financing Terms for Companies

2.3. Review of Financing Instruments

2.3.1. Equity and Mezzanine Capital

2.3.2. Debt Capital

2.3.3. Off-Balance Sheet Instruments

3. Implications for Corporate Banking Models in Germany

3.1. Challenges of Basel III for Corporate Banking

3.2. Market Potential and Overview

3.3. Behaviour of Existing Market Players and New Market Entrants

3.3.1. Existing Market Players

3.3.2. New Market Entrants

3.4. Development of Bank Loan Portfolios

4. Empirical Analysis of Developments of Capital Structures since 2007

4.1. Research Questions

4.2. Research Methodology

4.3. Research Sample

4.4. Development of German Companies’ Debt Capital Structures

4.4.1. Multinational Companies

4.4.2. Large Companies

4.4.3. Medium Sized Companies

4.5. Key Findings and Qualitative Evaluation

5. Conclusions

5.1. Aim and Objectives

5.2. Summary of the Empirical Evidence and Outlook

5.3. Outlook and Possible Future Scenarios for Banks

5.4. Research Limitations

5.5. Implications for Future Research

Objectives and Research Themes

The primary objective of this research is to evaluate whether German companies anticipated the potential consequences of post-2007 banking regulations—specifically the Basel III Accords—such as increased costs or the scarcity of bank loans, by altering their capital structures. Additionally, the study investigates the subsequent impact of these regulations on the German corporate banking market and the behaviors of its key participants.

• Impact of Basel III on corporate financing and lending conditions in Germany.
• Development of debt capital structures across different company size classes (Multinational, Large, and Medium Sized).
• Transformation of corporate banking business models and market competitiveness.
• Usage of alternative financing instruments compared to traditional bank loans.
• Empirical assessment of corporate balance sheet data from 2007 to 2013.

Excerpt from the Thesis

Summary of Chapters

1. Introduction: Outlines the motivation, aim, and structure of the thesis, specifically focusing on the financial crisis and the subsequent impact of Basel III on corporate finance.

2. Review of Literature: Provides an overview of German debt markets, Basel III regulations, and various corporate financing instruments.

3. Implications for Corporate Banking Models in Germany: Analyzes the challenges posed by Basel III for banks and the strategic responses of existing and new market players.

4. Empirical Analysis of Developments of Capital Structures since 2007: Presents the methodology and findings of an empirical assessment of 54 German companies regarding their debt capital structures.

5. Conclusions: Summarizes the research findings, offers an outlook on future scenarios for banks, and discusses research limitations.

Keywords

Basel III, Corporate Banking, Debt Capital Structure, German Companies, Bank Loans, Financial Crisis, Mittelstand, Capital Requirements, Financing Instruments, Deleveraging, Credit Crunch, Equity Ratio, Liquidity Ratios, Corporate Finance, Banking Regulation

Frequently Asked Questions

What is the core focus of this research?

The research focuses on the implications of post-2007 banking regulations, particularly Basel III, on the financing structures of German companies and the evolving business models within the German corporate banking sector.

What are the central thematic areas?

Key areas include the impact of capital requirements on loan supply, the shift in German company financing toward capital markets, and the competitive shifts in the banking landscape.

What is the primary research question?

The study aims to determine whether German companies anticipated regulatory consequences—like rising loan costs or potential scarcity—by proactively adjusting their debt capital structures between 2007 and 2013.

Which methodology is employed?

The thesis utilizes a mixed method approach, combining qualitative literature review with a quantitative assessment of balance sheet data from 54 German companies across three size categories.

What does the main part cover?

The main part analyzes the banking market's response to regulations, examines the empirical data on company capital structures, and describes trends such as disintermediation and bank strategy shifts.

Which keywords best characterize this work?

Keywords include Basel III, Corporate Banking, Debt Capital Structure, Mittelstand, and Financial Regulation.

What conclusion does the author reach regarding the 'credit crunch'?

The research concludes that there was no evidence for a broad-based credit crunch; rather, it identifies a decoupling of multinational companies from large and medium-sized firms in their usage of financing instruments.

How do 'Mittelstand' companies differ from multinational companies in their financing?

The research finds that multinational companies increasingly utilized bonds as a financing instrument, whereas 'Mittelstand' companies remained largely reliant on traditional bank loans and overdraft facilities throughout the observation period.