The capital markets union and firms' access to external market-based finance: Evidence and policy implications from a novel survey-based index

Firms’ access to capital markets among Eurozone countries is a challenging issue for the EU Capital Markets Union (CMU) agenda. We contribute to the current debate on the CMU by identifying the characteristics of firms that can be deemed ‘suitable’ for market-based finance. Based on survey-based research, we show which firm-specific attributes and country-specific features foster a firm’s likelihood of accessing non-bank sources of finance. Our results reveal that a few Eurozone countries appear to have achieved high access to capital market financing, but there is substantial unexploited potential among firms fit for market-based finance. Our research also indicates that the macro business environment and conditions – such as GDP growth, the degree of development of domestic financial markets, and the quality of the legal and judicial enforcement system – significantly impact firms’ market suitability. Our results therefore can be linked to a number of goals of the CMU Action Plan.