Broadening the Offering Choice of Corporate Bonds in Emerging Markets : Cost-Effective Access to Debt Capital
The development of corporate bond markets has been constrained in many emerging economies, partly because the regulatory model is implicitly designed for stand-alone public offerings. Corporate bonds are intrinsically more suitable for non-retail investors than for retail investors. Nonetheless, the prevailing regulatory model puts an excessive emphasis on disclosure and investor protection as well as government oversight, regardless of targeted investors. Such a non-differentiating regulatory approach disconnects issuers from investors by considerably raising opportunity costs to issuers. Broadening the choice of offering methods would lower corporate bond issuance costs, thereby allowing more issuers to finance their investments with bond issues. Additional forms of offerings are traditional private placements, institutional offerings, and shelf registration facilitated by integrated disclosure.
| Summary: | The development of corporate bond
markets has been constrained in many emerging economies,
partly because the regulatory model is implicitly designed
for stand-alone public offerings. Corporate bonds are
intrinsically more suitable for non-retail investors than
for retail investors. Nonetheless, the prevailing regulatory
model puts an excessive emphasis on disclosure and investor
protection as well as government oversight, regardless of
targeted investors. Such a non-differentiating regulatory
approach disconnects issuers from investors by considerably
raising opportunity costs to issuers. Broadening the choice
of offering methods would lower corporate bond issuance
costs, thereby allowing more issuers to finance their
investments with bond issues. Additional forms of offerings
are traditional private placements, institutional offerings,
and shelf registration facilitated by integrated disclosure. |
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