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The transactions costs of primary market issuance : the case of Brazil, Chile, and Mexico


  • Zervos, Sara


The author documents the precise costs of debt and equity issuance, both domestically and internationally, for firms in Brazil, Chile, and Mexico. Costs include investment banking and legal fees, regulatory and exchange listing costs, rating agency fees, and expenditures for marketing and publishing. Her findings suggest that Brazilian firms face similar costs in issuing debt locally or abroad, whereas domestic equity issuance is nearly twice as expensive as debt. While the Chilean domestic corporate debt market is well developed by emerging market standards (size of the market and maturity of issues), Chilean firms can issue debt more cheaply internationally than at home. In addition, while equity financing is cheaper in Chile from a transaction cost perspective, over the past decade most firms have used bonds rather than shares to raise capital. This financing trend is true in all three countries. Finally, Mexican firms can issue debt at the lowest costs of the three, but face the highest equity issuing costs. In addition to documenting these features, the author sheds light on how the investor base in these countries plays a strong role in influencing the ability of firms to access domestic capital markets.

Suggested Citation

  • Zervos, Sara, 2004. "The transactions costs of primary market issuance : the case of Brazil, Chile, and Mexico," Policy Research Working Paper Series 3424, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3424

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    Cited by:

    1. Augusto De La Torre & Sergio L. Schmukler, 2004. "Whither Latin American Capital Markets?," World Bank Publications, The World Bank, number 25933, July.
    2. World Bank, 2009. "Peru - Developing New Structured Financial Products to Channel Savings Towards Small and Medium Enterprises (SMEs) Growth," World Bank Other Operational Studies 3039, The World Bank.
    3. Cortina, Juan J. & Ismail, Soha & Schmukler, Sergio L., 2018. "Firm financing and growth in the Arab region," Economic Systems, Elsevier, vol. 42(2), pages 361-383.
    4. Jiménez, Luis Felipe, 2008. "Venture capital and innovation in Latin America," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    5. Juan J. Cortina & Tatiana Didier & Sergio L. Schmukler, 2017. "Corporate Debt Maturity in Developing Countries: Sources of Long- and Short-Termism," Mo.Fi.R. Working Papers 142, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    6. World Bank, 2007. "Chile : Investment Climate Assessment, Volume 2. Background Chapters," World Bank Other Operational Studies 7716, The World Bank.
    7. 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.
    8. Hela Cheikhrouhou & W. Britt Gwinner & John Pollner & Emanuel Salinas & Sophie Sirtaine & Dimitri Vittas, 2007. "Structured Finance in Latin America : Channeling Pension Funds to Housing, Infrastructure, and Small Businesses," World Bank Publications, The World Bank, number 6782, September.
    9. World Bank, 2005. "Corporate Governance Country Assessment : Brazil," World Bank Other Operational Studies 8273, The World Bank.
    10. Elkinawy, Susan, 2005. "Mutual fund preferences for Latin American equities surrounding financial crises," Emerging Markets Review, Elsevier, vol. 6(3), pages 211-237, September.
    11. Stephanou, Constantinos & Munoz, Emanuel Salinas, 2007. "Financing of the private sector in Mexico, 2000-05 : evolution, composition, and determinants," Policy Research Working Paper Series 4264, The World Bank.


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