Financial markets and corporate finance

Financial markets have become one of the principal ways for a company to finance today.

Historically, banks have always played a central role in the economy. The banking system was the main means of financing a business in 1980. However, today companies seeking funding to make it more and more on employment recruiters.


A As a company grows, it requires financial resources ever more important. Equity and bank loans the company no longer sufficient to cover its investment. The company will therefore use public savings.Through shares, it will deliver to investors a title to a portion of its capital. Investors may at any time sell their title to others and thus ensure the mobility of capital of the company. If the company needs additional funding, it may make a capital increase. That is to say, it will issue new shares. It may also propose to its shareholders to accept new securities at a price below the market price. The deregulation of capital markets of the 80 allowed companies to expand abroad. The share capital of French companies owned by foreign investors has increased significantly. In 2009, 42.3% of the market capitalization of the CAC 40 was owned by foreign investors.


A system reserved for the finest

Nevertheless, the IPO is only for large companies is a handful compared to SMEs. Small and medium enterprises can not meet the conditions of market access. According to INSEE, France had more than 3.4 million businesses in 2010 but only about 600 were listed. Furthermore, France does not yet have an index such as the Nasdaq in the U.S. that allows smaller companies to enter the financial markets. However, new markets for small and medium enterprises (SMEs) are emerging. Alter next, a new stock market founded by Euro next, is an example.


The company also has the ability to vary the nature of its capital through debt. It will also appeal to financial markets by issuing bonds, that is to say of debt securities. The bonds will finance its investment in the long run. In return, it will pay interest to the investor during the term of the loan.While the 2008 crisis since access to credit has dried up and the stock market is sluggish, companies increasingly rely on issuing bonds.


Companies may use derivatives in order to hedge against risks. For this, they traded in OTC markets attractive to their liquidity and flexibility. Companies can, for example, to hedge against currency risks. A French company that sells a product across the Atlantic in dollars and will be paid at a future date wish to ensure that it does not lose by the change. It will therefore, for example, sell the amount it should receive dollar against the euro to protect against a possible decline in the greenback. Derivatives are available on many underlying conditions such as stocks or indexes , but the company used more particularly to hedge against currency risks or for transactions involving commodities or interest rates.