The financing of companies in Malta

Abstract

This note examines recent developments in the financing structure of non- financial com panies in Malta. The financial liabilities of NFCs are mainly composed of debt, private equity, and trade credit, with evidence pointing to a shift away from bank lending in re cent years. This financial disintermediation is driven by a number of factors, including loan supply restrictions on the part of banks, the changing structure of the economy, an improvement in the financial position of NFCs, and higher usage of capital markets by large companies. In this light, the main issue is understanding whether this shift is a choice on the part of firms, or a constraint imposed by a tighter bank lending channel. The analysis in this note suggests that it is a combination of the two.