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Banks and Corporate Debt Market Development

Author

Listed:
  • Paul Dickie

    (Victoria University of Wellington)

  • Emma Xiaoqin Fan

    (Asian Development Bank)

Abstract

This paper explores the factors associated with the development of corporate debt markets using panel data covering 30 countries from 1989 to 2002. The results support Rajan and Zingales's (2003) 'interest group' theory of financial development that banks appear to oppose corporate debt market development as a potential force for their own disintermediation. The more concentrated the banking sector, the smaller the corporate bond market relative to the size of the economy. There is also evidence that the opening up of cross-border merger and acquisition activities and the presence of global corporations seem to weaken the influence of domestic banks. While outward-looking economic policies can reduce the power of domestic banks, the major countervailing force appears to be that committed governments recognizing corporate debt markets can enhance the resilience of their domestic economies.

Suggested Citation

  • Paul Dickie & Emma Xiaoqin Fan, 2005. "Banks and Corporate Debt Market Development," ADB Economics Working Paper Series 67, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0067
    as

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    References listed on IDEAS

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    1. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    2. Mr. Arvind Subramanian & Mr. Francesco Trebbi & Mr. Dani Rodrik, 2002. "Institutions Rule: The Primacy of Institutions over Integration and Geography in Economic Development," IMF Working Papers 2002/189, International Monetary Fund.
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    Keywords

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    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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