Doctoral thesis: Mezzanine financing helps to price risk in corporate financing

Doctoral thesis: Mezzanine financing helps to price risk in corporate financing

A new study shows that there are significant differences within company law regulation, accounting and taxation between countries regarding mezzanine financing. Thie means that the prerequisites for using mezzanine varies between countries.

In his doctoral thesis ”Mezzanine Financing - A Comparison between the Finnish and International Financial Market Regulation”, Mika Reunanen explores the company law background concerning the use of mezzanine financing. Reunanen’s study shows that a country’s legal system, history and market conditions have an impact on the company law and the specific standards concerning mezzanine.

According to the study mezzanine is currently mostly used in the US. Reunanen also examined how banks could use mezzanine financing more commonly as a lending form.

-My research shows that mezzanine could be a potential bank lending form. However, mezzanine cannot be a tool which would allow banks to step to transactions or projects which would have a higher risk than those which are financed by banks today with traditional senior debt loan instruments. It is rather a tool which would provide additional alternatives to price more accurately the risk they would take anyhow, says Reunanen.

The funding needs of a company is traditionally provided by the owner’s equity capital and external funding from banks. On top of this the company can opt for mezzanine financing. The number of financiers and their capacity to provide financing varies, which reflects on the availability of the mezzanine funding in general.   

Mika Reunanen will defend his doctoral thesis on the subject on Friday, May 17, at 12 pm. The field is commercial law. You can read the thesis here.

More information:
Mika Reunanen
Phone:+358 50 66875
E-mail: mika.reunanen@hanken.fi