The bond market plays an important role in the financing of firms’. Through it, it is possible to obtain the resources needed for investment in productive process that generate profits. Although its importance and the advantages that it provides, Colombia’s financial sector is still small and is mainly dominated by banks.
Through the analysis of a large firm-level dataset for the period 1997-2004, this paper explores the determinants and consequences of the development of the corporate bond market in Colombia.
The document finds, among others, that firms with higher profits and leverage rates have a higher probability to issue bonds. The article also suggests the presence of a crowding-out effect. It shows that the larger the Treasury bond market, the lower the probability that a firm will issue bonds. Finally, it indicates that investors with larger portfolios tend to hold more corporate bonds.
The authors conclude the following:
bond market development plays an important countercyclical role during periods of financial stress
Colombia’s bond market doubled in size in the period studied
corporate bond market in Colombia has been a source of financing exclusive to larger firms
size is a key driver of Colombia’s market’s activity
the entry cost to the bond market discourages firms participation, among other