《bank,money课件》HO_MB2e_ch09.pptVIP

Notes: Panel a shows sources of funds to corporations represented by the average values outstanding at the end of the year during the period 2005–2011. Panel b shows net changes in these categories. Panel a shows that the value of the stocks corporations have issued is much greater than the value of bonds or the value of loans, while panel b shows that bonds and loans were much more important sources of external financing for corporations during these years than were stocks. Panel a displays stock values—that is, the total values of these variables at a point in time. * * * * * Teaching Tips: Ask students why the problem of moral hazard is less serious for bonds than for stocks. Figure 9.1 Sources of External Funds to Small- to Medium-Sized Firms Small- and medium-sized businesses rely on loans and trade credit as their major sources of external finance. Conclusions about the Structure of the U.S. Financial System Three key features of the financial system: 2. The stock market is a less important source of external funds to corporations than is the bond market. Most of the trading on the stock market involves existing shares, not new shares of stock. In recent years, corporations have actually bought back from investors more stock than they have issued. Moral hazard is less of a problem with debt contracts than with equity contracts. Conclusions about the Structure of the U.S. Financial System Figure 9.2 External Sources of Funds to Corporations Conclusions about the Structure of the U.S. Financial System Corporations rely on stocks and bonds as major sources of external funds. Three key features of the financial system: 3. Debt contracts usually require collateral or restrictive covenants. Large household loans use the good being purchased as collateral. Many corporate bonds also specify collateral. To reduce moral hazard, both loans and bonds typically contain restrictive covenants. Conclusions about the Structure of the U.S. Financial Sys