Corporate Bond Market in Pakistan

Jun 21st, 2015
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1 Introduction: Since the Asian crisis considerable attention has been paid to the role of corporate bond markets in overall financial sector stability and economic development. Several studies have found that financial market development is correlated with economic development.

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National College of Business Administration & EconomicsCorporate Bond Market in Pakistan1 IntroductionSince the Asian crisis considerable attention has been paid to the role of corporate bond markets in overall financial sector stability and economic development. Several studies have found that financial market development is correlated with economic development. Corporate bond markets are important for several reasons including: as a source of long term financing,providing competition to the banking sector, and enhancing financial sector stability. The corporate bond market in Pakistan is still at an early stage of development with total public corporate debt issues accounting for just over one percent of GDP.When companies need financing they have four basic options: retained earnings, bank borrowing, corporate bonds, and equity. In emerging markets most of the corporate financing is through bank borrowing. For example in 2003 over 80 percent of corporate financing in emerging markets was in the form of bank loans. Similarly, in Pakistan the majority of external financing of firms is through the banking sector.In this assignment there will be a brief overview of why a corporate bond market is important followed by a discussion on the current state of the corporate bond market in Pakistan. We use a dataset on issued TFC since inception to estimate weighted average coupon rates for the TFC market.To our knowledge this has not been done before. The next section w

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