Mezzanine financing instruments in comparison to the classic financing sources
Abstract
The paper deals with innovated financing in the form of mezzanine financing instruments (sources). The authors aimed to identify, characterize, and assess mezzanine financing instruments in comparison to the classic corporate financing sources. Mezzanine financing represents an innovated form of financing interconnecting the features of equity and debt. The paper specifies the sources and characterizes and assesses pros and cons of each of them. Subsequently, it presents an overall evaluation of mezzanine financing instruments in comparison to the selected equity and debt financing sources. This evaluation was performed on the basis of 14 set criteria using a binary scale.
Keyword : corporate financing sources, mezzanine, equity, debt, Czech Republic
How to Cite
Tetrevova, L., & Svedik, J. (2018). Mezzanine financing instruments in comparison to the classic financing sources. Business, Management and Economics Engineering, 16, 133-146. https://doi.org/10.3846/bme.2018.2205
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Bondarenko, N. E., Maksimova, T. P., & Zhdanova, O. A. (2016). Agro-industrial clusters: opportunitiies for innovative development and financing. Journal of Internet Banking and Commerce, 21(S6), 1-13.
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Conlon, T., & Cotter, J. (2014). Anatomy of a bail-in. Journal of Financial Stability, 15, 257-263. https://doi.org/10.1016/j.jfs.2014.04.001
Dec, P., & Masiukiewicz, P. (2017). Mezzanine capital as a tool to increase enterprise value in crisis. Business and Management Horizons, 5(1), 52-61. https://doi.org/10.5296/bmh.v5i1.10955
EC. (2007). Mezzanine Finance – Final Report. European Commission. Retrieved from http://ec.europa.eu/enterprise/newsroom/cf/document.cfm?action=display&doc_id=1065&userservice_id=1
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Ernst, D., & Häcker, J. (2012). Applied international corporate finance (2nd ed.). München: Vahlen. https://doi.org/10.15358/9783800644636
Franke, G., & Hein, J. (2008). Securitization of mezzanine capital in Germany. Financial Markets and Portfolio Management, 22(3), 219-240. https://doi.org/10.1007/s11408-008-0082-x
Golej, R. (2016). Selected determinants of mezzanine financing in Poland. Journal of Entrepreneurship, Management and Innovation, 12(3), 57-84. https://doi.org/10.7341/20161233
Haldia, P., & Mittal, P. (2015). Mezzanine finance for the Indian micro finance industry. International Journal of Management Research and Business Strategy, 4(1), 192-196.
Helminen, M. (2010). The international tax law concept of dividend (1st ed.). Alphen aan den Rijn: Kluwer Law International.
Hutchison, N., et al. (2016). Financing infrastructure development: time to unshackle the bonds?. Journal of Property Investment & Finance, 34(3), 208-224. https://doi.org/10.1108/JPIF-07-2015-0047
Iannotta, G. (2010). Investment banking: a guide to underwriting and advisory services (1st ed.). Berlin: Springer. https://doi.org/10.1007/978-3-540-93765-4
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Koller, T., Goedhard, M., & Wessels, D. (2010). Valuation: measuring and managing the value of companies (5th ed.). Hoboken: John Wiley & Sons.
Lasher, W. R. (2011). Practical financial management (6th ed.). Mason: Cengage Learning.
Madura, J. (2011). International financial management (11th ed.). Mason: Cengage Learning.
Mäntysaari, P. (2010). The law of corporate finance: general principles and EU law: funding, exit, take-overs (1st ed.). Berlin: Springer.
Meluzin, T., & Zinecker, M. (2009). IPO – The Initial Public Offering as a source of financing for business development (1st ed.). Brno: Computer Press.
Mütze, M., Senff, T., & Möller, J. C. (2012). Real estate investments in Germany: transactions and devel-opment (2nd ed.). Berlin: Springer. https://doi.org/10.1007/978-3-642-19100-8
Oncioiu, I. (2012). Small and medium enterprises’ access to financing – a European concern: evidence from Romanian SME. International Business Research, 5(8), 47-58. https://doi.org/10.5539/ibr.v5n8p47
Öztekin, Ö. (2015). Capital structure decisions around the world: which factors are reliably important?. Journal of Financial and Quantitative Analysis, 50(3), 301-323. https://doi.org/10.1017/S0022109014000660
Rahim, N. A., Goodacre, A., & Veld, C. H. (2012). Wealth effects of convertible bond and warrant-bond offerings: a meta analysis. SSRN Electronic Journal.
Ramaswamy, R. (2016). D.D. Kosambi: Selected Works in Mathematics and Statistics (1st ed.). New Delhi: Springer. https://doi.org/10.1007/978-81-322-3676-4
Ravid, S. A., et al. (2007). When are preferred shares preferred? Theory and empirical evidence. Journal of Financial Stability, 3(3), 1980-237. https://doi.org/10.1016/j.jfs.2007.06.003
Rejnus, O. (2011). Financial markets (3rd ed.). Ostrava: Key Publishing.
Robb, A. M., & Robinson, D. T. (2012). The capital structure decisions of new firms. Review of Financial Studies, 27(1), 153-179. https://doi.org/10.1093/rfs/hhs072
Sanders, M. I. (2013). Joint ventures involving tax-exempt organizations (4th ed.). Hoboken: John Wiley & Sons. https://doi.org/10.1002/9781118705537
Sazanov, S. P., et al. (2016). Alternative sources of business development: Mezzanne financing. Scientific Papers of the University of Pardubice, 23(37), 143-154.
Shen, C., Xu, Z., & Yang, Y. (2016). A reduced pricing model for mezzanine financing based on options and support vector machines. Cluster Computing, 19(4), 2169-2177. https://doi.org/10.1007/s10586-016-0671-9
Silbernagel, C., & Vaitkunas, D. (2008). Mezzanine finance. Retrieved from http://pages.stern.nyu.edu/~igiddy/articles/Mezzanine_Finance_Explained.pdf
Stickney, C. P., et al. (2010). Financial accounting: an introduction to concepts, methods, and uses (13th ed.). Mason: Cengage Learning.
Strobel, F. (2012). International tax arbitrage, currency options and out-call parity conditions. Journal of International Financial Markets, Institutions and Money, 22(3), 473-486. https://doi.org/10.1016/j.intfin.2012.01.005
Svedik, J., & Tetrevova, L. (2015). Use of public debt mezzanine instruments in the Czech Republic. Procedia – Social and Behavioral Sciences, 210, 449-455. https://doi.org/10.1016/j.sbspro.2015.11.393
Svedik, J., & Tetrevova, L. (2014a, May). Mezzanine financing instruments as alternative sources of financing industrial enterprises. 23rd International Conference on Metallurgy and Materials (pp. 1908-1913). Brno, Czech Republic.
Svedik, J., & Tetrevova, L. (2014b, September). Utilization of mezzanine financing instruments by en-terprises in the Czech Republic. SGEM Conference on Political Sciences, Law, Finance, Economics & Tourism, 2, 853-860. Albena, Bulgaria. https://doi.org/10.5593/sgemsocial2014/B22/S6.108
Svedik, J., & Tetrevova, L. (2012, May). Mezzanine capital and corporate bonds – the Czech experience. 7th International Scientific Conference “Business and Management 2012“ (pp. 201-207). Vilnius, Lithuania.
Tetrevova, L. (2009). Mezzanine finance and corporate bonds. Finance: Challenges of the Future, 8(9), 146-147.
Tetrevova, L. (2006). Projects financing (1st ed.). Prague: Professional Publishing.
van Gelder, G., & Niels, B. (2013). Tax treatment of hybrid finance instruments. Derivatives & Financial Instruments, 15(4), 140-148.
Vasilescu, L. G. (2010). Financing gap for SMEs and the mezzanine capital. Economic Research-Ekonomska Istraživanja, 23(3), 57-67. https://doi.org/10.1080/1331677X.2010.11517423
Vasilescu, L. G. (2009). Mezzanine debt: benefits or drawbacks for firm’s financing?. Revista Tinerilor Economisti 1(12), 14-21.
Vasilescu, L. G. (2007). Mezzanine finance: closing the gap between debt and equity. The Journal of the Faculty of Economics – Economic Science, 2(3), 657-661.
Vlckova, V. (2011, May). Reasons of insufficient cooperation in information sharing within Czech en-trepreneurial environment and its impact on supply chain. 20th International Conference on Metallurgy and Materials (pp. 1259-1264). Brno, Czech Republic.
Zhang, L. (2016). A summary of literature: convertible bond issue announcement effect. American Journal of Industrial and Business Management, 6(2), 83-88. https://doi.org/10.4236/ajibm.2016.62007
Amos, S. W. (2013). Basic electronic circuits, Chapter 13. In L. W. Turner (Ed.), Electronics engineer’s reference book (4th ed.). London: Butterworth.
Anson, M. J. P., Fabozzi, F. J., & Jones, F. J. (2010). The handbook of traditional and alternative investment vehicles: investment characteristics and strategies (1st ed.). Hoboken: John Wiley & Sons. https://doi.org/10.1002/9781118258248
Batten, J. A., Khaw, K. L. H., & Young, M. R. (2013). Convertible bond pricing models. Journal of Economic Surveys, 28(5), 775-803. https://doi.org/10.1111/joes.12016
Bondarenko, N. E., Maksimova, T. P., & Zhdanova, O. A. (2016). Agro-industrial clusters: opportunitiies for innovative development and financing. Journal of Internet Banking and Commerce, 21(S6), 1-13.
Choudhry, M. (2010). An introduction to bond market (4th ed.). Hoboken: John Wiley & Sons.
Comino, S., Nicolò, A., & Tedeschi, P. (2010). Termination clauses in partnerships. European Economic Review, 54(5), 718-732. https://doi.org/10.1016/j.euroecorev.2009.12.007
Conlon, T., & Cotter, J. (2014). Anatomy of a bail-in. Journal of Financial Stability, 15, 257-263. https://doi.org/10.1016/j.jfs.2014.04.001
Dec, P., & Masiukiewicz, P. (2017). Mezzanine capital as a tool to increase enterprise value in crisis. Business and Management Horizons, 5(1), 52-61. https://doi.org/10.5296/bmh.v5i1.10955
EC. (2007). Mezzanine Finance – Final Report. European Commission. Retrieved from http://ec.europa.eu/enterprise/newsroom/cf/document.cfm?action=display&doc_id=1065&userservice_id=1
Elsas, R., Flannery, M. J., & Garfinkel, J. A. (2013). Financing major investments: information about capital structure decisions. Review of Finance, 18(4), 1341-1386. https://doi.org/10.1093/rof/rft036
Ernst, D., & Häcker, J. (2012). Applied international corporate finance (2nd ed.). München: Vahlen. https://doi.org/10.15358/9783800644636
Franke, G., & Hein, J. (2008). Securitization of mezzanine capital in Germany. Financial Markets and Portfolio Management, 22(3), 219-240. https://doi.org/10.1007/s11408-008-0082-x
Golej, R. (2016). Selected determinants of mezzanine financing in Poland. Journal of Entrepreneurship, Management and Innovation, 12(3), 57-84. https://doi.org/10.7341/20161233
Haldia, P., & Mittal, P. (2015). Mezzanine finance for the Indian micro finance industry. International Journal of Management Research and Business Strategy, 4(1), 192-196.
Helminen, M. (2010). The international tax law concept of dividend (1st ed.). Alphen aan den Rijn: Kluwer Law International.
Hutchison, N., et al. (2016). Financing infrastructure development: time to unshackle the bonds?. Journal of Property Investment & Finance, 34(3), 208-224. https://doi.org/10.1108/JPIF-07-2015-0047
Iannotta, G. (2010). Investment banking: a guide to underwriting and advisory services (1st ed.). Berlin: Springer. https://doi.org/10.1007/978-3-540-93765-4
Johnson, R. S. (2010). Bond evaluation, selection, and management (2nd ed.). Hoboken: John Wiley & Sons. https://doi.org/10.1002/9781118267639
Kallberg, J., Liu, C. H., & Villupuram, S. (2013). Preferred stock: some insights into capital structure. Journal of Corporate Finance, 21(3), 77-86. https://doi.org/10.1016/j.jcorpfin.2013.01.005
Knežević, G., Ljumović, I., & Pavlović, V. (2015, April). Access to financial sources in Serbia: The use of mezzanine instruments. Synthesis 2015 – International Scientific Conference of IT and Business-Related Research (pp. 419-422). Belgrade, Serbia.
Koller, T., Goedhard, M., & Wessels, D. (2010). Valuation: measuring and managing the value of companies (5th ed.). Hoboken: John Wiley & Sons.
Lasher, W. R. (2011). Practical financial management (6th ed.). Mason: Cengage Learning.
Madura, J. (2011). International financial management (11th ed.). Mason: Cengage Learning.
Mäntysaari, P. (2010). The law of corporate finance: general principles and EU law: funding, exit, take-overs (1st ed.). Berlin: Springer.
Meluzin, T., & Zinecker, M. (2009). IPO – The Initial Public Offering as a source of financing for business development (1st ed.). Brno: Computer Press.
Mütze, M., Senff, T., & Möller, J. C. (2012). Real estate investments in Germany: transactions and devel-opment (2nd ed.). Berlin: Springer. https://doi.org/10.1007/978-3-642-19100-8
Oncioiu, I. (2012). Small and medium enterprises’ access to financing – a European concern: evidence from Romanian SME. International Business Research, 5(8), 47-58. https://doi.org/10.5539/ibr.v5n8p47
Öztekin, Ö. (2015). Capital structure decisions around the world: which factors are reliably important?. Journal of Financial and Quantitative Analysis, 50(3), 301-323. https://doi.org/10.1017/S0022109014000660
Rahim, N. A., Goodacre, A., & Veld, C. H. (2012). Wealth effects of convertible bond and warrant-bond offerings: a meta analysis. SSRN Electronic Journal.
Ramaswamy, R. (2016). D.D. Kosambi: Selected Works in Mathematics and Statistics (1st ed.). New Delhi: Springer. https://doi.org/10.1007/978-81-322-3676-4
Ravid, S. A., et al. (2007). When are preferred shares preferred? Theory and empirical evidence. Journal of Financial Stability, 3(3), 1980-237. https://doi.org/10.1016/j.jfs.2007.06.003
Rejnus, O. (2011). Financial markets (3rd ed.). Ostrava: Key Publishing.
Robb, A. M., & Robinson, D. T. (2012). The capital structure decisions of new firms. Review of Financial Studies, 27(1), 153-179. https://doi.org/10.1093/rfs/hhs072
Sanders, M. I. (2013). Joint ventures involving tax-exempt organizations (4th ed.). Hoboken: John Wiley & Sons. https://doi.org/10.1002/9781118705537
Sazanov, S. P., et al. (2016). Alternative sources of business development: Mezzanne financing. Scientific Papers of the University of Pardubice, 23(37), 143-154.
Shen, C., Xu, Z., & Yang, Y. (2016). A reduced pricing model for mezzanine financing based on options and support vector machines. Cluster Computing, 19(4), 2169-2177. https://doi.org/10.1007/s10586-016-0671-9
Silbernagel, C., & Vaitkunas, D. (2008). Mezzanine finance. Retrieved from http://pages.stern.nyu.edu/~igiddy/articles/Mezzanine_Finance_Explained.pdf
Stickney, C. P., et al. (2010). Financial accounting: an introduction to concepts, methods, and uses (13th ed.). Mason: Cengage Learning.
Strobel, F. (2012). International tax arbitrage, currency options and out-call parity conditions. Journal of International Financial Markets, Institutions and Money, 22(3), 473-486. https://doi.org/10.1016/j.intfin.2012.01.005
Svedik, J., & Tetrevova, L. (2015). Use of public debt mezzanine instruments in the Czech Republic. Procedia – Social and Behavioral Sciences, 210, 449-455. https://doi.org/10.1016/j.sbspro.2015.11.393
Svedik, J., & Tetrevova, L. (2014a, May). Mezzanine financing instruments as alternative sources of financing industrial enterprises. 23rd International Conference on Metallurgy and Materials (pp. 1908-1913). Brno, Czech Republic.
Svedik, J., & Tetrevova, L. (2014b, September). Utilization of mezzanine financing instruments by en-terprises in the Czech Republic. SGEM Conference on Political Sciences, Law, Finance, Economics & Tourism, 2, 853-860. Albena, Bulgaria. https://doi.org/10.5593/sgemsocial2014/B22/S6.108
Svedik, J., & Tetrevova, L. (2012, May). Mezzanine capital and corporate bonds – the Czech experience. 7th International Scientific Conference “Business and Management 2012“ (pp. 201-207). Vilnius, Lithuania.
Tetrevova, L. (2009). Mezzanine finance and corporate bonds. Finance: Challenges of the Future, 8(9), 146-147.
Tetrevova, L. (2006). Projects financing (1st ed.). Prague: Professional Publishing.
van Gelder, G., & Niels, B. (2013). Tax treatment of hybrid finance instruments. Derivatives & Financial Instruments, 15(4), 140-148.
Vasilescu, L. G. (2010). Financing gap for SMEs and the mezzanine capital. Economic Research-Ekonomska Istraživanja, 23(3), 57-67. https://doi.org/10.1080/1331677X.2010.11517423
Vasilescu, L. G. (2009). Mezzanine debt: benefits or drawbacks for firm’s financing?. Revista Tinerilor Economisti 1(12), 14-21.
Vasilescu, L. G. (2007). Mezzanine finance: closing the gap between debt and equity. The Journal of the Faculty of Economics – Economic Science, 2(3), 657-661.
Vlckova, V. (2011, May). Reasons of insufficient cooperation in information sharing within Czech en-trepreneurial environment and its impact on supply chain. 20th International Conference on Metallurgy and Materials (pp. 1259-1264). Brno, Czech Republic.
Zhang, L. (2016). A summary of literature: convertible bond issue announcement effect. American Journal of Industrial and Business Management, 6(2), 83-88. https://doi.org/10.4236/ajibm.2016.62007