Corporate bond market as a source of capital funds in emerging economies – the Indian experience

Abstract

Over the years it has become fashionable to argue that a vibrant bond market would be vastly superior to the present bank-led model of debt finance for industries and businesses in emerging economies. While it works well in most developed economies, in countries like India, despite all efforts of the central bank and the financial markets regulators or regulatory authorities, business firms still depend largely on the banking system for their debt capital funds. This study is an attempt to enquire into whether it is the measurable parameters such as cost of funds or the buoyancy in the economy that affects the firms' decisions or not. If not, it would follow that other qualitative or behavioral (or non-measurable) factors may be responsible for the lack of firms' appetite for issuing bonds.

A Microstructure Study of Indian Corporate Bond Market: A Review

“…Through multiple regression analysis, the study reveals that, apart from GDP and trade openness, all selected variables significantly explain the volumes of corporate bonds. (Bhusnurmath & Ashra, 2018) Investigated the influence of economic factors on corporate bond market by considering base rate (bank lending rate), IIP and government yield as independent variables. They observed that base rate and IIP impacts positively while sovereign bond's yield impact negatively and here they conclude that bond market play as substitute to bank term loans.…”