| 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. |