The Transactions Costs of Primary Market Issuance: The Case of Brazil, Chile, and Mexico
The author documents the precise costs of debt and equity issuance, both domestically and internationally, for firms in Brazil, Chile, and Mexico. Costs include investment banking and legal fees, regulatory and exchange listing costs, rating agency...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, D.C.
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2004/10/5272666/transactions-costs-primary-market-issuance-case-brazil-chile-mexico http://hdl.handle.net/10986/14231 |
| Summary: | The author documents the precise costs
of debt and equity issuance, both domestically and
internationally, for firms in Brazil, Chile, and Mexico.
Costs include investment banking and legal fees, regulatory
and exchange listing costs, rating agency fees, and
expenditures for marketing and publishing. Her findings
suggest that Brazilian firms face similar costs in issuing
debt locally or abroad, whereas domestic equity issuance is
nearly twice as expensive as debt. While the Chilean
domestic corporate debt market is well developed by emerging
market standards (size of the market and maturity of
issues), Chilean firms can issue debt more cheaply
internationally than at home. In addition, while equity
financing is cheaper in Chile from a transaction cost
perspective, over the past decade most firms have used bonds
rather than shares to raise capital. This financing trend is
true in all three countries. Finally, Mexican firms can
issue debt at the lowest costs of the three, but face the
highest equity issuing costs. In addition to documenting
these features, the author sheds light on how the investor
base in these countries plays a strong role in influencing
the ability of firms to access domestic capital markets. |
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