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[IWS] OECD: CORPORATE BONDS, BONDHOLDERS AND CORPORATE GOVERNANCE [12 February 2015]
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Organisation for Economic Cooperation and Development (OECD)
OECD Corporate Governance Working Paper No. 16
CORPORATE BONDS, BONDHOLDERS AND CORPORATE GOVERNANCE [12 February 2015]
by Serdar Çelik, Gül Demirtaş, Mats Isaksson
[read online, 65 pages]
This report provides a comprehensive global overview of corporate bond issues since 2000 and experiences of governance engagement by bondholders. It also analyses trends in secondary bond markets, including market liquidity, the role of market makers and the relatively slow introduction of electronic trading systems. Among its findings are:
• The increase in money raised through corporate bond issues since 2008 is primarily attributable to non-financial companies. Between 2000 and 2007 non-financial companies raised 31% of the total amount worldwide. Since 2008 however, their share of annual total proceeds from corporate bond issues has on average been 46%. In 2013, they raised a record USD 1.6 trillion. This was more than what financial companies raised in the bond market in the same year.
• The increase in money raised by non-financial companies after 2008 has been accompanied by a 77% increase in the number of companies that issued bonds. In 2006 a total of 2,323 companies worldwide issued corporate bonds. In 2013 their number had risen to 4,073.
• Reducing debt and re-financing were the two main reasons that non-financial companies mentioned for issuing bonds.
• The increase in bond issues has been accompanied by a gradual shift in the corporate bond characteristics. There has been an overall increase in the amount of non-investment grade bonds, fixed-interest bonds and callable bonds. Since 2000, the share of non-investment grade bonds has increased from 4% to 18% of all corporate bond proceeds.
• In 2013, there were more companies from non-OECD economies issuing corporate bonds than from the United States. Today, companies from the People’s Republic of China (China) are the largest issuer of corporate bonds through private placements.
• The bulk of the trading takes place during the first few days after the issue. After the first several months, the long-term annual average turnover is around 25%. Of all bonds traded in the US, the 50 most traded bonds in 2012 traded on an average of only 90 times a day. This together with an apparent decrease in dealers’ corporate bond inventories has given rise to a discussion about insufficient liquidity in the bond market.
See additional OECD Corporate Governance Working Papers
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