The role of equity markets is particularly important for firms with higher growth opportunities, whose risk profile is typically more suited to market financing instruments with the possibility of risk-sharing (including private equity or “alternative investment” funds) rather than conventional bank debt.
Recent studies suggest that there is a financing gap in Europe for potential growth companies relative to other economies, which significant drops in equity valuations would tend to aggravate. [9] In parallel, the relevance of asset prices may have increased for households, following the significant growth in house prices.