Broadening The Offering Choice Of Corporate Bonds In Emerging Markets: Cost-Effective Access To Debt Capital

Endo, Tadashi

doi:10.1596/1813-9450-4655

Cited by 8 publications

(4 citation statements)

References 23 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The key is that the fee reduces or eliminates monitoring costs for bond investors. Endo (2008) and Burger and Warnock (2006) find that policy actions influencing costs of domestic bond and 2008 have increased or decreased relative to 13, 14, ..., or 19 years before. Then we indicate on the vertical axis the log difference in the ratio of domestic corporate bond issues to domestic bank claims during the same period (over the previous 13, 14, ..., or 19 years), averaging over observations in each half of the split sample.…”

Section: Introductionmentioning

confidence: 99%

Financial Choice in a Non-Ricardian Model of Trade

Russ

Valderrama²

2010

SSRN Journal

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We join the new trade theory with a model of choice between bank and bond financing to show the differential effects of financial policy on the distribution of firm size, welfare, aggregate output, gains from trade, and the real exchange rate in a small open economy. Increasing bank efficiency and reducing bond transaction costs both increase welfare but have opposite effects on the extensive margin of trade, aggregate exports, and the real exchange rate. Increasing the degree of trade openness increases firms' relative demand for bond versus bank financing. We identify a financial switching channel for gains from trade where increasing access to export markets allows firms to overcome high fixed costs of bond issuance to secure a lower marginal cost of capital. Abstract We join the new trade theory with a model of choice between bank and bond financing to show the differential effects of financial policy on the distribution of firm size, welfare, aggregate output, gains from trade, and the real exchange rate in a small open economy. Increasing bank efficiency and reducing bond transaction costs both increase welfare but have opposite effects on the extensive margin of trade, aggregate exports, and the real exchange rate. Increasing the degree of trade openness increases firms' relative demand for bond versus bank financing. We identify a financial switching channel for gains from trade where increasing access to export markets allows firms to overcome high fixed costs of bond issuance to secure a lower marginal cost of capital.

show abstract

Section: Introductionmentioning

confidence: 99%

Financial Choice in a Non-Ricardian Model of Trade

Russ

Valderrama²

2010

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…The robustness of these relationships is further demonstrated by applying a two-step System GMM regression to our core model, which produced the same results as our benchmark regression results. One plausible explanation for the positive association between ESG ratings and WACC is that most enterprises in developing economies are primarily funded by equity, owing to the underdevelopment of their bond markets (Endo, 2008). For instance, over half of our sampled Indian firms had less than 10% debt capital in their total capital structure, relying primarily on equity capital (Bloomberg, 2022).…”

Section: Conclusion Implications and Limitationsmentioning

confidence: 99%

Corporate Sustainability and Capital Costs: A Panel Evidence from BRICS Countries

Dua,

Sharma

2024

Indian Journal of Corporate Governance

View full text Add to dashboard Cite

Global sustainability challenges have triggered a sense of accountability in society, culminating in the growing incorporation of sustainability into corporate operations. This article aims to investigate the influence of environmental, social and governance (ESG) disclosure on a company’s cost of financing in emerging markets. Furthermore, the article examines the criticality of separate pillars of ESG in determining the companies’ capital costs using a panel dataset of 192 non-financial companies drawn from the equity indices from the BRICS countries for 10 years, spanning 2011–2020. Pooled Ordinary Least Square and fixed-effect panel regressions are used to test the hypothesised relationships. The robustness of our findings is validated by the application of the System Generalised Methods of Moments approach. The results show that ESG disclosure scores and their individual component scores are positively associated with the cost of equity and weighted average cost of capital. In contrast, there is a negative relationship with the cost of debt. Results demonstrate the apprehensions of equity providers and the reception of debt providers towards the companies’ ESG adoption. The governance pillar has the most significant influence on capital costs. The study enables managers to evaluate the economically ideal capital structure for ESG-compliant enterprises strategically.

show abstract

“…The improvement of institutions such as bankruptcy courts and contract enforcement reduces the burden of monitoring costs for banks, improving their efficiency as intermediaries and potentially lowering their interest rates on loans. Endo (2008) finds that government policies can also pose substantial barriers to entry into the bond market. Our model suggests that the gains from policies targeted at reducing any transactions costs like these depend on the level of transactions costs in other sectors of the financial market.…”

Section: Introductionmentioning

confidence: 99%

A Theory of Banks, Bonds, and the Distribution of Firm Size

Russ

Valderrama

2010

SSRN Journal

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe draw on stylized facts from the finance literature to build a model where altering the relative costs of bank and bond financing changes the entire distribution of firm size, with implications for the aggregate capital stock, output, and welfare. Reducing transactions costs in the bond market increases the output and profits of mid-sized firms at the expense of both the largest and smallest firms. In contrast, reducing the frictions involved in bank lending promotes the expansion of the smallest firms while all other firms shrink, even as it increases the profitability of both small and mid-size firms. Although both policies increase aggregate output and welfare, they have opposite effects on the extensive margin of production-promoting bond issuance causes exit while cheaper bank credit induces entry. When reducing transactions costs in one market, the resulting increase in output and welfare are largest when transactions costs in the other market are very high.

show abstract

Broadening The Offering Choice Of Corporate Bonds In Emerging Markets: Cost-Effective Access To Debt Capital

Cited by 8 publications

References 23 publications

Financial Choice in a Non-Ricardian Model of Trade

Financial Choice in a Non-Ricardian Model of Trade

Corporate Sustainability and Capital Costs: A Panel Evidence from BRICS Countries

A Theory of Banks, Bonds, and the Distribution of Firm Size

Contact Info

Product

Resources

About