2 Regression models: The thesis uses secondary data and some econometric models and econometric software Eviews and Stata to estimate the correlation between factors affecting the size o
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1 Rationale
Corporations have many advantages in rasing fund by issuing bonds
The size of Vietnam corporate bond market is still small
Corporations mainly issue convertible bonds for existing
shareholders or issue bonds in private form for certain partners So,
bondholders often hold bonds until due As a result, there are almost
no transactions in secondary corporate bond market Therefore, study
to increase the size of corporate bonds in Vietnam is necessary
There are many studies about corporate bond market in developed
countries, such as United State, Korea, … These corporate bond
markets are developed and have large size Besides, many
researchers study about ermerging corporate bond markets in Asian
or South East Asian Their studies mainly focus on factors that affect
to the market size However, there are very few similar studies in
Vietnam
The studies in Vietnam are often about Government bonds In studies
about corporate bonds, researchers always used descriptive statistics
method Meanwhile, the use of mathematical methods to identify or
quantify the factors affecting the size of the market, as an important
basis for developing market development solutions, should be
implemented
In summary, the implementation of an in-depth study, which focuses
on identifying the factors that influence the size of the corporate bond
market in Vietnam, is a gap Therefore, the topic "Factors affecting
the size of Vietnam's corporate bond market" was selected for
research
2 Objectives
(i) Assess the status of the impact of factors on the size of Vietnam's
corporate bond market
(ii) Propose some recommendations to increase the size of Vietnam's
corporate bond market
Research questions:
(i) Are there any factors affecting the size of the corporate bond
market in general and the corporate bond market in Vietnam in
particular?
(ii) How is the impact of these factors on the size of the corporate
bond market in Vietnam?
2
market based on these factors?
3 Research subjects
The size of the Vietnamese corporate bond market and the factors affecting the size of the market The thesis focuses on issued bonds and listed bonds traded on the secondary market
4 Research scope 4.1 Vietnam primary corporate bond market
Macro – factors affect the size of Vietnam primary corporate bond market in 2005 – 2018
4.2 Vietnam secondary corporate bond market
Factors affect the size of Vietnam secondary corporate bond market
in 2012 – 2017
5 Methodology
(1) Descriptive statistics: sort and describe the data about issuance volume, trading volume and impact factors of corporate bonds (2) Regression models: The thesis uses secondary data and some econometric models and econometric software (Eviews and Stata) to estimate the correlation between factors affecting the size of Vietnam's corporate bond market and the impact of these factors
6 New contributions of the thesis 6.1 In terms of theory
Firstly, the thesis has developed a model for testing factors affecting the issuance volume of corporate bonds and conducting testing for the market of primary corporate bonds in Vietnam Tested factors include: (1) the size of the economy, (2) the openness of the economy, (3) the development stage of the economy, (4) the size of the banking system, (5) interest rate variability, (6) exchange rate variability, (7) foreign exchange reserves and (8) creditors' rights The thesis also uses the value of bonds issued more in each quarter as
a scale for issuance scale instead of the current bond value The data used is time series data corresponding to the size of quarterly bond issuance in the period 2005 - 2018
Secondly, the thesis is the first research in Vietnam to test the factors affecting the trading volume of listed corporate bonds Tested factors include: (1) issuance volume, (2) age, (3) default risk, (4) profit volatility and (5) stocks’ trading volume The data used is panel data, corresponding to 28 listed bonds traded during 2012-2017
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The result shows that the size of the economy, the openness of the
economy, the size of the banking system, exchange rate variability,
foreign exchange reserves and creditors' rights are factors that affect
tothe issuance volume of corporate bonds in Vietnam
In secondary market, age, credit risk, profit volatility, stocks’ trading
volume are factors that affect to trading volume of listed corporate
bonds
CHAPTER 1: THE BASIC OF THEORY AND
LITERATURE REVIEW
1.1 The basic of theory about facors affecting the size of corporate
bond market
1.1.1 Structure of corporate bond market
1.1.2 The size of corporate bond market
1.1.2.1 Conceptions about the size of corporate bond market
According to Oxford dictionary: “Size is how large or small
something or someone” Therefore, it can be understood that the size
of the corporate bond market is how large or small of market
Because the corporate bond market includes both primary and
secondary markets, the size of the primary market is considered
through the issuance volume and the size in the secondary market is
shown by liquidity (Mizen and Tsoukas, 2014)
1.1.2.2 Measurement of the size of corporate bond market
Primary bond market
Issuance volume = Total value of outstanding bonds/GDP (1)
Issuance volume = Total value of bonds issued (2)
Secondary bond market
(i) Number of transactions (3)
(ii) Number of bonds traded (4)
(iii) Turnover (5)
1.1.3 Factors affecting to the size of corporate bond market
1.1.3.1 Factors affecting to the size of primary corporate bond
market
The size of economy The small economy often lack
useful tools for growing bond market
The openness of the economy Economies with large
openness usually have more development corporate bond markets
The development stage of the economy The higher the
4
Interest rate variability The larger interest rate variablility will increase the risk of long-term assets in the financial market, especially corporate bonds and the size of the corporate bond market will decrease
The size of banking system In some cases, the larger the banking system, the less developed the corporate bond market However, in an open economy, commercial banks now become the necessary subjects to promote the development of the corporate bond market
Exchange rate variability
Foreign exchange reserves Increasing of the level of foreign exchange reserves will lead to the development of corporate bond market
Creditors’ rights Countries that have strong creditors’ rights will promote the increasing of the size of corporate bond market
1.1.3.2 Factors affecting to the size of secondary corporate bond market
Issuance Volume Higher issuance volume, higher trading
transactions
Bond’s age Bonds issued in the latest time period will be traded most often
Credit risk Investors do not want to invest to bonds that have high credit risk
Profit volatility
Stock’s trading volume
1.2 Literature review 1.2.1 Foreign studies Research by Hawkins (2002) has made a multi-dimensional
assessment of the relationship between the banking system and the size of corporate bond market Eichengreen and Luengnaruemitchai (2004) tested 15 factors affecting the size of the
bond market The results show that the size of the economy, the size
of the banking system, the exchange rate, compliance with international accounting standards, corruption and state management are factors that influence the bond market of Asian countries
Research by Bhattacharyay (2013) focused on understanding the
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factors The testing results for corporate bonds show that the issuance
volume of the corporate bond market is affected by factors: the size
of the economy, the openness of the economy, the size of the banking
system, the stage of development of the economy and interest rate
variability Kowalewski and Pisany (2017) suggested that creditors'
rights and market size are positively related Mizen and Tsoukas
(2014) studied the factors affecting the issuance decision of
businesses In this study, the authors believe that there are both
macro and micro factors that influence corporate decision making
The results show that the size and growth of revenue of the business
has a positive relationship with the size of the issuance The
regression results of Braun and Briones (2006)’s study showed that
the most important factor determining the size of the market Bond is
the level of economic development, or GDP per capita The size of
the banking system and the creditors' rights also have a positive
relationship with the size of the bond market Focusing on emerging
economies, a study by Tendulkar (2015) concluded that international
corporate bond size is affected by GDP per capita, number of listed
enterprises, and domestic credit and interest rate variability The total
size of the corporate bond market is affected by the size of the
government bond market, the number of listed companies, interest
rate spreads, domestic credit, CPI and hedging premiums Mu et al
(2013) suggested that domestic credit has a positive effect, interest
rate variability have a negative relationship to the size of the African
corporate bond market Fredrick's (2014) showed different results
Accordingly, only the exchange rate, interest rate fluctuations, the
size of the economy and average income affect to the size of the
corporate bond market Another similar study was conducted in the
Indian corporate bond market by Maurya and Mishra (2016) which
also gave conclusions that are not very similar to those of previous
emerging market studies According to Maurya and Mishra (2016),
the Indian corporate bond market was most significantly affected by
foreign exchange reserves
Study of Alexander et al (2000) focused on testing factors that affect
trading volume of high – yield corporate bonds The results showed
that issuance volume and bonds’age are two factors that have strong
impact on trading volume of these bonds Alexander et al (2000)
6
Besides, this study also showed that credit risk and profit volatility all
have positive impact to trading volume In contrast, Wahyudi and Robbi (2009) mentioned that issuance volume has a negative impact
to trading volume Hotchkiss and Jostova (2007) expanded the scope
of research, confirmed that issuance volume and age have strong
impact to trading volume of corporate bonds
1.2.2 Studies in Vietnam Tran Thi Thanh Tu (2007) used descriptive statistic method to
compare and analyze data on Vietnam corporate bond market in the period of 2003 - 2007 According to the author, most of corporate bonds were issued at that time were long-term bonds, and they belong to State enterprises or big enterprises The secondary bond
market has almost no bonds traded Trinh Mai Van (2010) and Phan Thi Thu Hien (2014) suggested that the lack of legal framework on
corporate bonds and information transparency was reason of the underdevelopment of the corporate bond market in Vietnam
The research of Vuong and Tran (2010) analyzed Vietnam corporate
bond market in the period of 1992 – 2009 with a large dataset from different aspects They confirmed that the issuance of corporate bonds focused on large enterprises, mainly state-owned enterprises and the competition of state-owned enterprises limited the ability to
raise debt of SMEs Stuydy of HNX (2016) also described the current
situation of the market in recent years
Nguyen Thi Nhung and Tran Thi Thanh Tu (2019) gathered 11
groups of criteria to assess the liquidity of corporate bond market In
particular, size of issuance, outstanding debts of corporate bonds
market, growth speed of corporate bonds in circulation are used to measure the liquidity of primary bond market and volume of
corporate bonds traded and coefficient rotation are used to measure
the liquidity of secondary bond market in Viet Nam This research compared these criteria’s data of Vietnam and some other countries
to assess the liquidity of Vietnam bond market
Research of Nguyen Hoa Nhan et al (2014) is the first research in
Vietnam that uses regression analysis method to analyzie the relationship between the issuance volume of corporate bonds and some macro – factors This study showed that the openness of economy, the size of banking system and issuance volume in last
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contrast, exchange rate and the stage of development of the economy
have negative impact to the issuance volume of corporate bonds in
Vietnam
1.2.3 Research gaps
Tại Việt Nam, các nghiên cứu về TPDN chủ yếu ở dạng thống kê,
mô tả số liệu và có rất ít nghiên cứu về các yếu tố tác động tới quy
mô thị trường TPDN Đối với quy mô của thị trường TPDN sơ cấp,
nghiên cứu của Nguyễn Hòa Nhân và cộng sự (2014) là nghiên cứu
đầu tiên sử dụng mô hình phân tích hồi quy Tuy nhiên, các yếu tố
được phân tích trong nghiên cứu còn ít và tỷ lệ phần trăm giải thích
sự biến động của biến phụ thuộc thông qua biến độc lập còn thấp Có
thể xem xét thêm nhiều yếu tố khác để xác định thêm các yếu tố tác
động tới quy mô phát hành TPDN Việt Nam Ngoài ra, nghiên cứu về
quy mô thị trường TPDN Việt Nam chủ yếu tập trung vào quy mô
phát hành Quy mô giao dịch của TPDN trên thị trường thứ cấp là
vấn đề ít được nghiên cứu Đặc biệt là chưa có nghiên cứu nào sử
dụng mô hình hồi quy để xem xét các yếu tố tác động tới quy mô
giao dịch của TPDN Việt Nam
CHAPTER 2: THE REAL SITUATION OF VIETNAM
CORPORATE BOND MARKET
2.1 Overview of Vietnam’s economic environment in the period
of 2005 – 2017
2.2 Overview of Vietnam corporate bond market
2.3 The structure of Vietnam corporate bond market
2.3.1 The primary cororate bond market
Issuance volume
The annual issuance volume greatly affects the size of the market It
can be seen that the annual issuance volume of corporate bond in
Vietnam has tended to increase in the period of 2005 - 2018, from
over VND 137 billion in 2005 to over VND 40,000 billion in 2018
Terms of bond
Terms of corporate bonds in Vietnam are very diverse, ranging from
1 to 20 years, depending on the target and issuance conditions In
cases of supplementing NWC, or debt restructuring, firms will raise
short – term loans (<3 years) Loans for financing projects will be
more than 3 years, or more than 5 years In general, in the period of
2005 - 2018, the average term of corporate bonds of less than 3 years
8
Trading
Corporate bonds are traded in 2 ways: (1) at stock exchange and (2) OTC
Size of market
In the period of 2012 - 2015, the trading volume was only a few trillion, an average of over 3.8 trillion per year, in 2016 reached over
10 trillion In the period of of 2016 - 2017, each year there were average of 7 trillion worth of corporate bonds trading on the secondary market
2.4 Policies to develop corporate bond market in some other countries
CHAPTER 3: METHODOLOGY 3.1 Research framework and models
3.2 Methodology
3.2.1 Descriptive satistics 3.2.2 Regression analysis
3.2.2.1 Regression analysis for time series data
The stationary of time series data Augmented Dickey – Fuller (ADF) test is used to test the stationary
of variables If > at significant levels of 1%, 5% and 10%, variables are stationary at the corresponding significant levels (Levin et al., 2002)
Regression analysis Data of factors affect the issuance volume is quarterly data and it is called time series data In which, t is used to refer time points in the series Model of time series data is as follow (Nguyen Quang Dong and Nguyen Thi Minh, 2013):
(a) Because (a) is a linear regression model, it will be estimated by the least square method (Ordinary Least Square - OLS) When the assumptions are satisfied, the estimation results are reliable Test for specification errors
Test for specification errors: multicollinearity, multivariate normality, autocorrelation, homoscedasticity, functional form
3.2.2.2 Regression analysis for panel dât
Regression methods
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Baltagi (2005), panel data model is as follow:
(b) Model without :
(c) Depending on , there are 3 estimation methods: Pooled OLS –
POLS, Random Effects Model – REM and Fixed Effects Model –
FEM
3.3 Dataset
3.3.1 Dataset of factors affect to issuance volume
(i) Data of issuance volume is secondary data that is collected
quarterly from website Asianbondsonline.adb.org in the period of
2005 – 2018
(ii) The size of economy (Measurement as GDP), the openness of
economy (Measurement as Experts) are secondary data that are
collected from website finance.vietstock.vn GDP is a non-linear data
so it will be taken as a logarithm
(iii) Interest rate variability, the size of banking system
(Measurement as domestic credit), exchange rate variability and
foreign exchange reserves are secondary data that are collected
quarterly from website data.imf.org in the period of 2005 – 2018
(iv) The stage of development of economy (Measurement as GDP per
capita) is secondary data that is collected yearly from website
data.worldbank.org in the period of 2005 – 2018 and is interpolated
in quarterly data GDP per capita is a non-linear data so it will be
taken as a logarithm
(v) Creditors’ right is analyzed and calculated basing on Djankov et
al (2007) and Laws of bankruptcy 1993, 2004, 2014 of Vietnam
3.3.2 Dataset of factors affect to trading volume
(i) Trading volume is primary data that is collected monthly from
HSX in the period of 2012 – 2017
(ii) Bond’s age is based on time of issuance
(iii) Credit rating of issuers is used to measure default risk of bonds
because corporate bonds have not rated in Vietnam Credit rating of
issuers is secondary data that is collected from CIC
10
(v) Stock’s trading volume is secondary data that is collected from
finance.tvsi.com.vn/data
3.4 The process of testing 3.4.1 Factors affect to issuance volume
(i) Test the stationary of time series data (ADF test) (ii) Estimate model by using OLS and test the model’s errors (iii)Test for specification errors: multicollinearity (VIF), multivariate normality (Jarque – Bera test), autocorrelation (Breusch-Godfrey test), homoscedasticity (Breusch – Pagan – Godfrey test and White test), functional form (Ramsey test)
(iv) If model has errors, remedies will be performed
3.4.2 Factors affect to trading volume
(i) Test the stationary of panel data (ii) Analyze the correlation between variables
(iii) Using Breusch – Pagan test to find out the most suitable estimation method for panel data
(iv) If prob > 0.1: using POLS
(v) If prob < 0.1: using Hausman test to test the correlation between and independent variables If Prob < 0.1: using FEM; if prob > 0.1: using REM
CHAPTER 4: ANALYZE FACTORS THAT EFFECT TO THE SIZE OF VIETNAM CORPORATE BOND MARKET 4.1 Factors affect to primary corporate bond market
4.1.1 Variables and measurement
Expected model:
(1)
In which: t = 1, 2, , 56 represent for 4 quarters/year of the period from 2005 to 2018
Table 4.1: Variables and Measurement of model (1) Model Variables Measurement Symbol Unit
(1) Size Issuance volume in
each quarter
IVOL Billions
VND (1) The size of
economy
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(1) The
openness of
economy
(1) The stage of
development
of economy
Log(GDP per capita)
GDP per capita is interpolated in quarterly data
PGDP
(1) Interest rate
variablility
Leding interest rate – Deposit interest rate
DRATE % (1) The size of
banking
system
Domestic credit CREDIT Millions
VND (1) Exchange
rate
variability
Average exchange rate
in quarter
EXR VND/USD
(1) Foreign
exchange
reserves
Foreign exchange reserves
FER Millions
USD (1) Creditors’
right
The index ranges from
0 (weak creditor rights) to 4 (strong creditor rights
2012 – 2014: 1 score;
2015 – 2017: 2 scores
RIGHTS 0 – 4
scores
4.1.2 Descriptive statistics
4.1.3 Test factors affect to the issuance volume
4.1.3.1 The stationary of time series data
Data of variables is tested the stationary on EVIEWS The results
show that IVOL is stationary at 0 level (10%), log(PGDP) is
stationary at 0 level (1%), EXPRT is stationary at 2 level and other
variables are stationary at 1 level
4.1.3.2 Regression analysis of model (1.1)
The results of regression analysis of model (1.1)
12
Dependent Variable: IVOL Method: Least Squares Sample (adjusted): 2005Q2 2018Q4 Included observations: 55 after adjustments
Variable Coefficient Std Error t-Statistic Prob
LOG(GDP) 2.82E+02 1.35E+02 2.085928 0.0426(**) D(EXPRT) 0.017436 0.008629 2.020693 0.0492(**) LOG(PGDP) -483.992 367.7746 -1.316 0.1947 CREDIT 0.037872 0.011563 3.275279 0.002(***) DRATE -5.31E+01 4.83E+01 -1.09984 0.2771 EXR -0.051366 0.042415 -1.21106 0.2321 FER 1.47E-02 4.74E-03 3.109871 0.0032(***) RIGHTS 65.55346 94.01795 0.697244 0.4892
(Source: Author’s calculations)
In which: (*): significant at 10%, (**): significant at 5%, (***): significant at 1%
Prob(F-statistic) of model (1.1) = 0.00001 < 0.05 Test the errors of model (1.1) The results show that model (1.1) do not have errors except multicollinearity because VIF index of some variables are more than
10 So that, variable with high VIF index is removed off model (1.1) New model is as follow:
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4.1.3.3 Regression analysis of model (1.2)
The results of regression analysis of model (1.2)
Dependent Variable: IVOL
Method: Least Squares
Sample (adjusted): 2005Q2 2018Q4
Included observations: 55 after adjustments
Variable Coefficient Std Error t-Statistic Prob
C -470.421 9.64E+02 -4.88E-01 0.6279
LOG(GDP) 196.2759 119.4337 1.643388 0.107
D(EXPRT) 0.019231 0.008586 2.23984 0.0299(**)
CREDIT 0.039318 0.0116 3.389591 0.0014(***)
DRATE -15.8087 39.40295 -0.40121 0.6901
EXR -0.09919 0.022044 -4.49945 0.000(***)
FER 0.010778 0.003688 2.922729 0.0053(***)
RIGHTS 131.8318 80.00656 1.647762 0.1061
(Source: Author’s calculations)
In which: (*): significant at 10%, (**): significant at 5%, (***):
significant at 1%
Prob(F-statistic) of model (1.2) = 0.000007 < 0.05
Log(GDP), DRATE and RIGHTS have prob > 0.1 and they are not
significant at 10%
Test errors of model (1.2)
The results show that model (1.2) do not have errors Because Prob
of DRATE is more than 0.1, this variable is removed off New model
is as follow:
14
(1.3)
4.1.3.4 Regression analysis of model (1.3)
The results of regression analysis of model (1.3) Dependent Variable: IVOL
Method: Least Squares Date: 12/17/19 Time: 14:00 Sample (adjusted): 2005Q2 2018Q4 Included observations: 55 after adjustments
Variable Coefficient Std Error t-Statistic Prob
LOG(GDP) 206.748 115.5235 1.789661 0.0798(*) D(EXPRT) 0.018589 0.008361 2.223195 0.0309(**) CREDIT 0.041407 0.010275 4.0298 0.0002(***) EXR -0.10087 0.021453 -4.70171 0.0000(***) FER 0.010688 0.003649 2.929367 0.0052(***) RIGHTS 143.6858 73.69839 1.949646 0.0571(*)
(Source: Author’s calculations)
In which: (*): significant at 10%, (**): significant at 5%, (***): significant at 1%
Prob(F-statistic) of model (1.3) = 0.000003 < 0.05
Test errors of model (1.3)
The results show that model (1.3) do not have errors The last model is as follow:
IVOL t = - 609.552 + 206748Log(GDP) t + 0.018589D(EXPRT) t + 0.041407CREDIT – 0.10087EXR t + 0.010688FER t +
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4.1.3.5 Discuss the research’s results
(i) The stage of development of the economy (PGDP) and the interest
rate variability (DRATE) have no impact on the issuance volume of
corporate bonds (ii) The size of the economy (GDP), the openness of
the economy (EXPRT) and the size of the banking system (CREDIT)
have a positive impact on the issuance volume of corporate bonds
(iii) Exchange rate fluctuations (EXR) have a negative impact on the
issuance volume (iv) Foreign exchange reserves (FER) have a
positive impact on the volume of corporate bond issuance (v)
Creditors' rights (RIGHTS) have a positive impact on issuance
volume
4.2 Factors affect to trading volume
4.2.1 Variables and measurement
Expected models:
(2.1)
(2.2)
(2.3)
In which: i = 1, 2, ., 28 (represent for 28 bonds), t = 1, 2, …, 72
corresponds with 12 months/year in the period of 2012 – 2017
Table 4.4: Variales and measurement of model (2)
Model Variables Measurement Symbol Unit
(2) Trading
volume
(1) Number of transactions in month
TIMES Transaction
(2) Number of bonds are traded in month
NBOND Bond
(3) Turnover TOVER Billions VND (2) Issuance Issuance SIZE Thousands VND
16
volume volume in par
value (2) Age Number of
months since issuance
AGE Qualitative variable
AGE_1: more than
2 years AGE_2: in years AGE_3:
Unreleased/Expired (2) Default
risk
Firm’s credit rating
RATING Qualitative variable
RATING_1: In rank A
RATING_2: In rank B
RATING_3: not rated
(2) Profit variability
Volume Weighted Average Price (VWAP) variability
DVWAP %
(2) Stock’s trading volume
Value of stock traded in month
SVOL Billions VND
4.2.2 Descriptive statistics 4.2.3 Test factors affect to trading volume
4.2.3.1 Test the staytionary of panel data
Levin – Lin – Chu (LLC) test is used to test the stationary of panel data The rusults show that SVOL is stationary at 0 level (1%) and other variables’ data are stationary at 1 level (1%)
4.2.3.2 Correlation analysis
The correlation between dependent variables The correlation between TIMES, NBOND and TOVER is quite tight because the correlation coefficient is approximately 0.7 So that, TIMES, NBOND and TOVER are suitable to measure the trading volume
The correlation between independent variables The absolut of correlation coefficients between independent are less
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The correlation between independent variables and
dependent variables
The correlation between the independent variables and the dependent
variables is very low due to the correlation coefficient is less than
0.7
4.2.3.2 Results
Table 4.11: Methods are used to estimate model (2)
Breusch – Pagan Prob = 0.000 0.000 0.000
(Soure: Athour’s calculations)
Table 4.12: Results of testing the R 2
Dependent variables TIMES NBOND TOVER
R 2
(Soure: Athour’s calculations)
Table 4.13: Results of testing 3 models
Variable
(Soure: Athour’s calculations)
In which: (*): significant at 10%, (**): significant at 5%, (***):
18
Because all three models use the fixed effects model (FEM), the SIZE variable is removed from the models Therefore, it is not possible to assess the impact of SIZE on the trading volume
In 3 models, AGE_1, AGE_2, RATING_1 and RATING_2 are significant at 1% and have positive impact to dependent variables The coefficient of these variables show that bonds are issued in 2 years and are rated in B category have bigger trading volume than others
In model (2.2) and model (2.3), SVOL variable has negative impact
to NBOND and TOVER but DVWAP has positive impact to them
4.2.3.3 Discuss the research’s results
(i) Because SIZE did not change during the study period, it is removed in FEM (ii) Bonds with age is less than 2 years are traded more than other bonds (iii) Bonds with rank B have bigger trading volume than bonds with rank A (iv) The greater the volatility of the bond's profit, the greater the trading volume (v) The greater the issuers’ stocks traded, the less bonds traded
CHAPTER 5: RECOMMENDATIONS 5.1 Development orientation of Vietnam's corporate bond market in the coming time
5.2 Recommendations
5.2.1 Economic growth, stabilizing exchange rates and increasing the size of foreign exchange reserves
Growth is accompanied by curbing inflation, ensuring large balances, maintaining macroeconomic stability It is necessary to strictly control and ensure that banks perform the policy on restricting foreign currency loans to enterprises At the same time, it should license to some organizations that are allowed to trade in foreign exchange, to meet the needs of foreign exchange trading of businesses
5.2.2 Promote the development of the banking system in terms of market makers
Banks should be considered as market makers They need to be motivated to play this role
5.2.3 Establish professional credit rating organizations and rate corporate bonds
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Basel Accords can establish subsidiaries that provide credit rating
services Government should issue regulations that require businesses
to make credit rating on bonds before issuance
5.2.4 Market control and information disclosure
Information of bonds about credit rating, price, … should be publiced
for investors Regulations about information disclosure (for both
public issuance and private issuance) should be issued
5.2.5 Improve bondholder’s right
The missing regulations should be added: (1) creditors may refuse or
agree for the business's application for bankruptcy, (2) secured
creditors can regain the mortgaged properties after the business apply
for bankruptcy
5.2.6 Revise and add reguations related to the corporate bond
market
In 2018, the Government issued Decree 163/2018 / ND - CP about
corporate bond issuance However, there are still some issues in
Decree 163 that need to be adjusted Regulators need to review laws
in a comprehensive way, eliminate duplicated content and agree on
conflicting content
5.2.7 Upgrade technical infrastructure for corporate bond market
The technology infrastructure of the corporate bond market in
Vietnam still lacks a lot of tools to support market activities such as
issuance registration / issuing license system; standard bid system or
release survey support system; an online ISIN (international
securities trading code) system; information listing system on bonds;
bond pricing information system; National information system on
corporate bonds
CONCLUSIONS
The corporate bond market plays an important role in the
socio-economic development of each country Increasing the size of the
corporate bond market will help businesses finance most of their
activities, reduce dependence on the commercial banking system,
limit risks of the financial market, and promote economic
development In order to develop appropriate solutions to increase
the corporate market size, it is necessary to learn about the factors
affecting the market size The thesis has achieved the research
objectives
20
Firstly, overview previous studies about the corporate bond market, the size of the corporate bond market and the factors affecting the size of the corporate bond market
Secondly, test econometric models and identify factors affecting the size of the corporate bond market in Vietnam
Thirdly, based on the results of testing the econometric model on the impact factors, propose some recommendations to increase the size
of the corporate bond market in Vietnam
2 The limitations
Data Factors affect to issuance volume GDP per capita in Vietnam is only annualized and must use software
to interpolate to quarterly figures Interpolation and actual statistics may differ
Factors affect to trading volume Model about factors affect to trading volume is estimated by using data of listed corporate bonds However, trading volume of listed bonds is very small compared with trading volume of whole secondary corporate bond market Besides, credit rating of bonds is replaced by credit rating of issuers In Vietnam, credit rating of businesses is updated 2 times/year
Models
In fact, there are many factors that affect the size of the primary corporate market However, the thesis only focuses on studying the impact of macro factors without mentioning the micro - internal factors of enterprises Therefore, the variables in the model only explain a small part of the fluctuation of the issuance volume of corporate bonds in Vietnam