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Why do firms issue abroad? Lessons from onshore and offshore corporate bond finance in Asian emerging markets

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  • Paul Mizen
  • Frank Packer
  • Eli Remolona
  • Serafeim Tsoukas

Abstract

Corporate bond issuers in emerging economies in Asia have often had a choice between an onshore market and an offshore one. Since 1998, however, many of these issuers have increasingly turned to the onshore market. This paper investigates systematically what factors have influenced this choice between markets for issuers in eight emerging economies – China, Hong Kong SAR, Indonesia, Korea, Malaysia, the Philippines, Singapore and Thailand. For variables measuring market depth and liquidity, the availability of hedging instruments, and the size of the investor base, we rely on BIS statistics that have not been used in this literature before. We combine these market-level data with firm-level data in an unbalanced panel for the eight countries covering the period 1995 to 2007. We control for variables representing agency, static trade-off and risk management theories of the capital structure. Our results show that the choice between domestic and foreign markets has changed over time in large part because of the increased depth of the onshore market. The firms that benefit from such market development tend to be the unseasoned issuers rather than the seasoned ones.

Suggested Citation

  • Paul Mizen & Frank Packer & Eli Remolona & Serafeim Tsoukas, 2012. "Why do firms issue abroad? Lessons from onshore and offshore corporate bond finance in Asian emerging markets," Working Papers 2012_16, Business School - Economics, University of Glasgow.
  • Handle: RePEc:gla:glaewp:2012_16
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    Cited by:

    1. Bose, Udichibarna & MacDonald, Ronald & Tsoukas, Serafeim, 2015. "Education and the local equity bias around the world," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 39(C), pages 65-88.
    2. Filardo, Andrew & Genberg, Hans & Hofmann, Boris, 2016. "Monetary analysis and the global financial cycle: An Asian central bank perspective," Journal of Asian Economics, Elsevier, vol. 46(C), pages 1-16.
    3. Hallwood, Paul & MacDonald, Ronald, 2014. "Picking the Right Budget Constraint for Scotland," SIRE Discussion Papers 2015-27, Scottish Institute for Research in Economics (SIRE).
    4. Udichibarna Bose & Ronald MacDonald & Serafeim Tsoukas, 2014. "Policy initiatives and firms access to external finance: Evidence from a panel of emerging Asian economies," Working Papers 2015_01, Business School - Economics, University of Glasgow.
    5. Robert N. McCauley & Patrick McGuire & Vladyslav Sushko, 2015. "Global dollar credit: links to US monetary policy and leverage," Economic Policy, CEPR;CES;MSH, vol. 30(82), pages 187-229.
    6. Paul Mizen & Frank Packer & Eli Remolona & Serafeim Tsoukas, 2014. "Capital structure and the issuance of corporate bonds in emerging Asia," Chapters,in: Global Shock, Risks, and Asian Financial Reform, chapter 13, pages 510-540 Edward Elgar Publishing.
    7. Bose, Udichibarna & MacDonald, Ronald & Tsoukas, Serafeim, 2014. "The role of education in equity portfolios during the recent financial crisis," SIRE Discussion Papers 2015-26, Scottish Institute for Research in Economics (SIRE).
    8. José María Serena & Ramon Moreno, 2016. "Domestic financial markets and offshore bond financing," BIS Quarterly Review, Bank for International Settlements, September.
    9. Marlene Amstad & Steven Kong & Frank Packer & Eli Remolona, 2016. "A spare tire for capital markets: Fostering corporate bond markets in Asia," BIS Papers, Bank for International Settlements, number 85, November.
    10. Frank Packer & Chang Shu, 2015. "Introduction," BIS Papers chapters,in: Bank for International Settlements (ed.), Cross-border financial linkages: challenges for monetary policy and financial stability, volume 82, pages v-ix Bank for International Settlements.
    11. Spiros Bougheas & Hosung Lim & Simona Mateut & Paul Mizen & Cihan Yalcin, "undated". "Lessons from the Asian Crisis: An Open Economy Credit Channel Model where Export Status Matters," Discussion Papers 12/16, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    12. Shim, Ilhyock & Zhu, Haibin, 2014. "The impact of CDS trading on the bond market: Evidence from Asia," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 460-475.
    13. Robert Neil McCauley & Patrick McGuire & Vladyslav Sushko, 2015. "Dollar credit to emerging market economies," BIS Quarterly Review, Bank for International Settlements, December.
    14. Udichibarna Bose & Ronald McDonald & Serafeim Tsoukas, 2016. "Policy initiatives and Örmsíaccess to external finance: Evidence from a panel of emerging Asian economies," Working Papers 2016_18, Business School - Economics, University of Glasgow.
    15. Renzo Rossini & Zenon Quispe, 2015. "Evolution of bank and non-bank corporate funding in Peru," BIS Papers chapters,in: Bank for International Settlements (ed.), What do new forms of finance mean for EM central banks?, volume 83, pages 273-292 Bank for International Settlements.
    16. Torsten Ehlers & Frank Packer & Eli Remolona, 2014. "Infrastructure and Corporate Bond Markets in Asia," RBA Annual Conference Volume,in: Alexandra Heath & Matthew Read (ed.), Financial Flows and Infrastructure Financing Reserve Bank of Australia.

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    Keywords

    bond financing; offshore markets; derivatives; capital structure; emerging markets; market depth; Asian bond markets;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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