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An Anatomy of Corporate Bond Markets; Growing Pains and Knowledge Gains

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  • Pipat Luengnaruemitchai
  • Li L Ong

Abstract

The objective of this paper is to discuss the key issues relating to the development of local corporate bond markets. We examine the requirements for local corporate bond market development, and compare and contrast experiences across both mature and emerging markets. We suggest that core aspects such as benchmarking, corporate governance and disclosure, credit risk pricing, the availability of reliable trading systems, and the development of hedging instruments are fundamental for improving the breadth and depth of corporate debt markets. The demand and supply of corporate bonds are dependent on factors such as the investor base, both local and foreign, and government policies toward the issuance process and associated costs, as well as the taxation regime. The sequencing of reforms is key to market development.

Suggested Citation

  • Pipat Luengnaruemitchai & Li L Ong, 2005. "An Anatomy of Corporate Bond Markets; Growing Pains and Knowledge Gains," IMF Working Papers 05/152, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:05/152
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    References listed on IDEAS

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    4. Barry Eichengreen & Pipat Luengnaruemitchai, 2006. "Why doesn’t Asia have bigger bond markets?," BIS Papers chapters,in: Bank for International Settlements (ed.), Asian bond markets: issues and prospects, volume 30, pages 40-77 Bank for International Settlements.
    5. T. Todd Smith, 1995. "Markets for Corporate Debt Securities," IMF Working Papers 95/67, International Monetary Fund.
    6. Jorge Desormeaux, 2002. "Capital Markets in Chile: From Financial Repression to Financial Deepening," Economic Policy Papers Central Bank of Chile 04, Central Bank of Chile.
    7. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 329-368.
    8. Kevin Keasey & Steve Thompson & Mike Wright (ed.), 1999. "Corporate Governance," Books, Edward Elgar Publishing, volume 0, number 1708, April.
    9. Bank for International Settlements, 2002. "The development of bond markets in emerging economies," BIS Papers, Bank for International Settlements, number 11, November.
    10. John Hawkins, 2002. "Bond markets and banks in emerging economies," BIS Papers chapters,in: Bank for International Settlements (ed.), The development of bond markets in emerging economies, volume 11, pages 42-48 Bank for International Settlements.
    11. World Bank & International Monetory Fund, 2001. "Developing Government Bond Markets : A Handbook," World Bank Publications, The World Bank, number 13865.
    12. Vives,Xavier (ed.), 2000. "Corporate Governance," Cambridge Books, Cambridge University Press, number 9780521781640, December.
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    Citations

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    Cited by:

    1. Nath, Golaka, 2012. "Indian corporate bonds market –an analytical prospective," MPRA Paper 38992, University Library of Munich, Germany.
    2. Eidenmüller, Horst & Engert, Andreas & Hornuf, Lars, 2015. "Where do firms issue debt? An empirical analysis of issuer location and regulatory competition in Europe," International Review of Law and Economics, Elsevier, vol. 41(C), pages 103-115.
    3. Jamel Boukhatem, 2009. "Essai sur les déterminants empiriques de développement des marchés obligataires," EconomiX Working Papers 2009-32, University of Paris Nanterre, EconomiX.
    4. Diego Valderrama & Katheryn N. Russ, "undated". "A Theory of Banks, Bonds, and the Distribution of Firm Size," Working Papers 915, University of California, Davis, Department of Economics.
    5. Helene Poirson Ward, 2007. "Financial Market Implications of India’s Pension Reform," IMF Working Papers 07/85, International Monetary Fund.
    6. Sze Kim Chin & Nur Adiana Hiau Abdullah, 2013. "Announcements Effect of Corporate Bond Issuance and Its Determinants," Contemporary Economics, University of Finance and Management in Warsaw, vol. 7(1), March.
    7. Hasan, Iftekhar & John, Kose & Kadiyalad, Padma, 2016. "Debt structure when bankruptcy law offers incentives to restructure," Research Discussion Papers 13/2016, Bank of Finland.
    8. Kathrin Berensmann & Florence Dafe & Ulrich Volz, 2015. "Developing local currency bond markets for long-term development financing in Sub-Saharan Africa," Oxford Review of Economic Policy, Oxford University Press, vol. 31(3-4), pages 350-378.
    9. Sensarma, Rudra & Bhattacharyya, Indranil, 2016. "The impact of monetary policy on corporate bonds in India," Journal of Policy Modeling, Elsevier, vol. 38(3), pages 587-602.
    10. Russ, Katheryn N. & Valderrama, Diego, 2012. "A theory of bank versus bond finance and intra-industry reallocation," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 652-673.
    11. Endo, Tadashi, 2008. "Broadening the offering choice of corporate bonds in emerging markets : cost-effective access to debt capital," Policy Research Working Paper Series 4655, The World Bank.
    12. Christian Calmès & Raymond Théoret, 2008. "Banking Deregulation and Financial Stability : is it Time to re-regulate in Canada ?," RePAd Working Paper Series UQO-DSA-wp042008, Département des sciences administratives, UQO.

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