What is driving the corporate bond market development in Asia

We investigate the development of corporate bond markets in 10 Asian countries from 1995 to 2014. Using panel data on the market size and total issue of bonds by financial and non-financial companies, we confirm that macroeconomic and institutional factors are related to the depth of the market. In addition, we show that the issuance of bonds is also determined by other factors that strongly depend on the issuer type. We show that creditor rights and institutional quality are important in explaining the issuance of bonds by financial institutions. Furthermore, we determine a strong positive association between the level of domestic credit and the market and issue size of corporate bonds. In our opinion, the results indicate that there is a positive relationship between the development of the corporate bond market and the banking sector. These findings indicate that increased demand for bank loans induced the issuance of bonds by financial institutions which, in turn, may have led to the development of corporate bond markets in Asia.