Why Do Firms Issue Abroad? Lessons from Onshore and Offshore Corporate Bond Finance in Asian Emerging Markets

51 Pages Posted: 12 Apr 2013

See all articles by Paul Mizen

Paul Mizen

University of Nottingham; Bank of England; Centre for Economic Policy Research (CEPR)

Frank Packer

Bank for International Settlements (BIS)

Eli M. Remolona

Bank for International Settlements (BIS) - Monetary and Economic Department

Serafeim Tsoukas

University of Glasgow

Date Written: December 2012

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.

Keywords: bond financing, offshore markets, derivatives, capital structure, emerging markets, market depth, Asian bond markets

JEL Classification: C23, E44, F32, F34, G32, O16

Suggested Citation

Mizen, Paul and Packer, Frank and Remolona, Eli M. and Tsoukas, Serafeim, Why Do Firms Issue Abroad? Lessons from Onshore and Offshore Corporate Bond Finance in Asian Emerging Markets (December 2012). BIS Working Paper No. 401. Available at SSRN: https://ssrn.com/abstract=2247964

Paul Mizen (Contact Author)

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom
+44 115 951 5479 (Phone)
+44 115 951 4159 (Fax)

Bank of England

Threadneedle Street
London, EC2R 8AH
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

Frank Packer

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt
Switzerland
4161 280 8449 (Phone)

Eli M. Remolona

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

IFC 2 Bldg, 78/F
Central
Hong Kong
Hong Kong
+852 2982 7150 (Phone)
+852 2982 7123 (Fax)

Serafeim Tsoukas

University of Glasgow ( email )

Adam Smith Business School
Glasgow, Scotland G12 8LE
United Kingdom

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