Determinants of the Development of Corporate Bond Markets in Argentina: One Size Does Not Fit All

Documento de Trabajo 348

25 Pages Posted: 28 Jun 2007

Date Written: April 2007

Abstract

Conventional theory leads to expect bonds to be a financing vehicle for large firms because of economies of scale and contracting costs. We find both in our econometric evidence for firms quoted on Latin American stock exchanges, and in our survey results for Argentina, that size of assets is a robust determinant of the use of bond finance. This result, together with the fact that there are few firms that are large in terms of market value, can help understand why Argentina, as well as Latin America, has small bond markets in terms of the ratio of the stock of bonds to GDP. Since firm value represents the present value of the cash flows against which the firm borrows, the outstanding stock of corporate bonds is as small as the size of Argentine firms.

Keywords: debt structure, leverage, short term debt, corporate bonds, firm size, firm value

JEL Classification: G3, E6

Suggested Citation

Fernandez, Roque Benjamin and Pernice, Sergio and Streb, Jorge Miguel, Determinants of the Development of Corporate Bond Markets in Argentina: One Size Does Not Fit All (April 2007). Documento de Trabajo 348, Available at SSRN: https://ssrn.com/abstract=997157 or http://dx.doi.org/10.2139/ssrn.997157

Roque Benjamin Fernandez (Contact Author)

Universidad del CEMA ( email )

1054 Buenos Aires
Argentina

HOME PAGE: http://www.cema.edu.ar/u/rbf/

Sergio Pernice

University of CEMA ( email )

Department of Finance Cordoba 637 - Piso 3
1054 Buenos Aires
Argentina
4314-1304 (Phone)
4314-1654 (Fax)

Jorge Miguel Streb

Universidad del CEMA ( email )

Av. Cordoba 374
Buenos Aires, CABA
Argentina

HOME PAGE: http://www.ucema.edu.ar/u/jms/

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