Corporate bond markets have become an increasingly important source of financing for non-financial companies. This trend is coupled with a relative decrease in traditional bank lending to non-financial companies and low levels of bond interest rates. This report provides a comprehensive global overview of all corporate bond issues since 2000 and experiences of governance engagement by bondholders.
The report also analyses trends in secondary bond markets, including market liquidity, the role of market makers and the relatively slow introduction of electronic trading systems. By constructing an overall "covenant protection index", the report suggest that bond investors in their search for yield have overall traded governance rights for higher expected returns. This shift also seems to be associated with higher risk-taking. The report ends with a discussion about the scope for institutional changes that may build a larger community of truly informed and motivated bond investors.
Related readingOECD initiative on corporate governance, value creation and growth