بازارهای بدهی و ساختار بدهی شرکتها در بازار در حال ظهور: مثال از آفریقای جنوبی

This is a first attempt at gauging the effects of corporate public debt issuance on the debt structure, risk profile and valuation of firms in an emerging market. We find that financial services firms, along with government institutions, are important early supporters of an organized public debt market. Firms in this market use equity, public debt and private debt funds simultaneously as need be. Consistent with predictions of the corporate debt structure literature, public debt-issuing firms are larger, older, more profitable, and less informational opaque than non-public debt-issuing firms. Moreover, public debt-issuing firms experience significant reductions in both overall and systematic risks, and incur lower cost of capital following issuance than non-public debt issuers. These and other findings of the study suggest deepening national debt markets can be a fruitful financial market development exercise for emerging markets.

Up until the late 1980's, a corporate public debt market was non-existent in South Africa. Consequently, when considering external financing, firms had two choices. They either issued equity or they borrowed privately from a bank or a non-bank private lender. However, research has shown that the lack of competition from other debt suppliers gives banks an information monopoly (Rajan, 1992 and Houston and James, 1996). This monopoly stems from the fact that the information communicated by the firm to the bank is a result of their banking relationship, and cannot be easily communicated to potential lenders in the short run. A firm wishing to switch lenders would find it difficult to do so in good time. As a result, banks are able to expropriate rents from the firm's investments because they are aware of the firm's inability to find alternative debt funding in good time and terms — thus, the firm bears a hold-up cost in the process. Therefore, in the absence of a corporate public debt market, firms with profitable investments most likely turn to other private lenders for possible less costly financing (Ojah and Manrique, 2005), though non-bank private debt providers perform largely similar functions as banks, and are thus, capable of expropriating some rent from a firm's investments as well. It is therefore, plausible that South African firms (as those in most emerging capital markets) may have suffered hold-up cost due to the near-monopoly nature of their main debt fund suppliers (banks). The advent/development of an organized public debt market (Bond Exchange of South Africa (BESA)) naturally provides an additional supply of capital which has more diversified terms (bond indenture) than non-bank private debts have relative to bank debts. All else equal, this increase in supply and terms of debt funds would increase competition in the capital market, which in turn would affect: (1) firms' debt and capital structures (Houston and James, 1996, Johnson, 1997 and Denis and Mihov, 2003Ojah and Manrique, 2005), (2) firms' risk profile (Modigliani and Miller, 1963, Hadlock and James, 2002 and Denis and Mihov, 2003) and (3) firms' cost of capital and valuation (Modigliani and Miller, 1963, Myers, 1977, De Angelo and Masulis, 1980, Reeb et al., 2001 and Denis and Mihov, 2003). Although this market is still quite young, this paper uses data based on listed firms to examine and provide preliminary findings on the firm-specific determinants of the choice of public debt versus private debt (debt structure), the effects of public debt issuance on systematic (and overall) risks of the firm and the resultant cost of capital, and in the process offer some answers to the question of whether organized debt markets ought to be among the financial market development considerations of emerging markets such as South Africa1 (Singh, 1999 and Hooper, 2007). Singh (1999) questions the wisdom of emerging market economies establishing organized securities markets when such economies either lack the requisite institutional infrastructures or effective demand for the securities.2 To date, corporate debt structure studies have been approached from the view point of why bank (private) debt is special (Fama, 1985, Diamond, 1991, Houston and James, 1996, Hadlock and James, 2002 and Hooks, 2003, and others). We frame the question from the view point of “why firms seek public debt?” as well, in order to add some insightful voice to the call for national debt market deepening as a means of blunting the effects of cross-border financial market shocks (Ma and Remolona, 2005, Plummer and Click, 2005, Hooper, 2007 and Johansson, 2008). In our recollection, existing corporate debt structure studies (i.e., the choice of public debt versus private debt funding) have scarcely focused on an emerging capital market and used data from firms' financial reports and/or local organized public debt markets (such as Mexican Bond Exchange or Korean Bond Market).3 There are reasons for this paucity of studies focused on emerging markets' corporate debt structures. Upon studying South Korea, one of the few emerging capital markets boasting an organized public debt market, Guerrero (2007) notes the following: “Unfortunately, our data do not allow us to distinguish some of those critical effects, a limitation common to similar studies on corporate debt (Schmukler and Vesperoni, 2006, p. 203, the most recent, present a similar caveat). For instance, the data do not allow us to distinguish bank debt from other types of debt…”4 This highlights the absence of data richness as an obstacle to studying corporate debt structure in emerging markets in detail. Another possible obstacle is the notion of usually excluding financial firms from capital (debt) structure analyses due mainly to the fuzziness between traditional debts and product-based liability- or deposit-type debts on the books of financial firms. In other words, though financial firms demand debt as well, they are viewed largely as suppliers of debt. Given the fledgling nature of public debt markets in emerging capital markets, excluding financial firms from an already small sample, amount to forgoing learning about some important aspects of financial market development. Yet, understanding the evolutionary nature of such a market, with all industries included, is just as insightful as one that is limited to non-financial firms alone. It is our view that employing appropriate study techniques would permit us to gain rich insights into the early stages of market creation for better future developmental ideas, while awaiting a richer and larger sample for comparative type studies.5 Briefly, we document that this emerging market's data are consistent with much of the extant theory and empirical evidence on corporate debt structure. We find that firms using the public debt market are larger, older, more profitable, and less susceptible to information asymmetries, than firms that use only private debt markets. Second, public debt-issuing firms experience significant reductions in both overall and systematic risks, and incur lower cost of capital following issuance. Interestingly, we find that financial services firms are early active supporters of the fledgling organized public debt market. Overall, these findings support the call for other emerging markets to consider organized public debt market as a possible fruitful aspect of the financial market development agenda. For the remainder of the paper, we provide a brief historical account and overall structure of South Africa's fledgling public debt market. Next, we provide the literature background that sets up the testable hypotheses. We then describe the data and test design, discuss test results, and conclude the paper.

This study, interestingly, shows that financial firms, along with government institutions, are important early supporters of an organized public debt market. Further, it shows that though firms would optimize their debt (capital) structure if privy to a fuller complement of external funds suppliers, certain firms are better suited to borrowing from the public as well as private lenders while others with different characteristics are suited to borrowing mainly from private lenders, in line with predictions of the corporate debt structure literature. Specifically, we find that the corporate debt structure in South Africa fits well the predictions of the debt structure literature: The average public borrower is significantly larger, more profitable, has a longer operating history, and is less opaque than non-public borrowers. We find that public debt-issuing firms in the South African emerging capital market experience a significant reduction in both overall and systematic risks following issuance, and incur lower costs of capital as a result. In contrast, industry-matched, non-public debt issuers experience insignificant changes in these performance indicators. Given the sample of this study and our inclusion of financial services firms, we view these results as preliminary. Though the appropriate techniques used in the analyses permit us to infer important conclusions, such as for the first time recording that financial services firms and government units are important early supporters of a fledgling organized capital market, future larger and richer set of data would allow us to gain more and stronger insights into corporate debt structure in emerging markets. Importantly, note that though South Africa is an emerging market, its capital markets' infrastructure is considered world-class. We therefore, need a cross-country analysis before we can draw general conclusions about the benefits of establishing a corporate public debt market in emerging markets — such as the Bond Exchange of South (BESA). It is plausible that emerging markets have to attain a certain level of general capital market development, with appropriate requisite institutions, before they can derive the sort of benefits recorded in the South African case. This point is particularly instructive in the light of Singh's (1999) scepticism about aspects of financial market development in emerging markets. Nevertheless, our results support calls for emerging markets to consider the deepening of their debt markets as a fruitful aspect of their financial markets development agenda.