What promotes greater use of the corporate bond market? A study of the issuance behaviour of firms in Asia

Abstract

This paper investigates bond market development in Asia by exploring the determinants of firms' decisions to issue public debt in a range of Asian economies. Using a novel database covering the period 1995 to 2007, we use comparable micro level panel of nine countries-China, Hong Kong SAR, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan, and Thailand-to explore factors that promote bond issuance by firms. We control for firm characteristics and market features such as bond market depth and liquidity; we also consider supra-national policy initiatives to improve bond market function. Our paper demonstrates that regional initiatives have been an important step towards greater bond issuance by firms in Asia, mostly by fostering market deepening and improving liquidity.JEL classifications: E22, F32, G32.

A discrete choice model for large heterogeneous panels with interactive fixed effects with an application to the determinants of corporate bond issuance

“…Mizen and Tsoukas (2013), Badoer and James (2016), Adrian et al (2012), Denis and Mihov (2003), Becker and Ivashina (2014)). These studies have documented that issuer characteristics like size, rating, profitability, leverage, equity prices, monetary policy and the supply of bank credit are important determinants of bond issuance.…”

“…Mizen and Tsoukas (2013), Badoer and James (2016), Adrian et al (2012), Denis and Mihov (2003), Becker and Ivashina (2014), Gomes and Phillips (2012)), there is not much evidence yet on the effect of yields on bond issuance.…”

Corporate Failures and the Denomination of Corporate Bonds: Evidence from Emerging Asian Economies Over Two Financial Crises

“…Thus financial openness is likely to encourage bond issuance (see Mizen et al (2012)). Second, closer physical distance to major centers of financial activity would promote financial integration and may encourage firms to issue bonds directly by reducing their issuance costs, lowering the cost of entering and exiting the market for investors and providing easier access to domestic firms that typically face thresholds that bar their entry to international bond markets and Mizen and Tsoukas (2014)). To the extent that the financial openness index and physical distance of the markets influence firms' ability to issue corporate bonds, they provide reasonable exogenous instruments for firm's access to bond markets.…”

“…It is clear that during the early years of the sample, and especially during the Asian crisis, most bonds were denominated in foreign currency. In the post-crisis period, domestic bond issues took off, before the Asian Bond Fund Initiatives in 2003 (see Mizen et al (2012), Packer and Remolona (2012) and Mizen and Tsoukas (2014)), while the foreign bond issuance also increased from 2001 (albeit not significantly so). We also observe that domestic bonds expanded considerably during the 2007-09 crisis, while at around the same time the foreign market seemed to flatten.…”

“…There is also significant evidence that firms increased cash stocks in Asia as a precautionary motive to ensure investment and growth (Guariglia and Mizen (2012)). The progress of development in Asia, especially for corporate bonds, has been rapid and steady since 2005, although it is lacking in terms of depth and liquidity compared to Western counterparts (Genberg and Sulstarova (2008), Packer and Remolona (2012) and Mizen and Tsoukas (2014)). In our study we find that access to domestic bond finance is one factor that could ameliorate emerging markets crises and protect firms against failures.…”