Abstract:

We analyze institutional determinants of the development of local currency (LCY) corporate bond markets in the period from 2010 to 2016 for a cross-country sample. We consider a wide range of indicators of the quality of institutional environment, including the Heritage Foundation's Index of Economic Freedom, the World Bank’s indicators of the development of political and legal institutions, the World Economic Forum’s indicators of corporate culture, the development and regulation of financial markets. Unlike most previous studies, we test not only static regression models (multifactor linear regressions), but also dynamic models based on the generalized method of moments (GMM), which allows to solve the problem of endogeneity of variables. The sample consists of 420 quarterly observations on 15 emerging markets, which were the leaders by the issuance volume of corporate bonds in the pre-crisis 2013.