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Prospects And Challenge Of Nepalese Debt Market

2827 words - 12 pages

* Prospects and Challenges of Nepalese Debt market

1. Introduction
Debt market may be short-term, intermediate and long-term. Short-term and intermediate-term financing sources include trade credit, bank loan, finance company loan, commercial paper; inventory financing includes the issuance of mortgages and bonds (Shim J.K; 1989:138). The importance of the debt market in an emerging economy cannot be overemphasized. In the presence of uncertainty and prudential norms, banks often decline to lend for long term projects, and borrowing from overseas markets may be constrained by country risk perceptions and restrictions on capital mobility. In such cases, the market for debt securities ...view middle of the document...

Saganga M. Mussa and ViscalKihongo(2011) study show that the more the restrictive covenants were stringent the more the companies were unwilling to issue corporate bonds; on the other hand the more the corporate bonds markets were liquid, and the more investors were informed and knowledgeable about corporate bonds the more companies were willing to issue corporate bonds.
Natalia Riesel(2014) found that investors view bond covenants as important instruments in mitigating agency problems, and an increase in the cost of debt.Rajan and Winton (1995) and Watts and Zimmerman (1986, 1990), state that by allocating state-contingent control rights to debt holders, covenants protect bondholders from possible opportunistic actions of managers which, in turn, allow firms to reduce the cost of debt by issuing bonds at lower yields due to agency problems could be substantial
3. Research objectives:
The study was governed by two objectives:
a) To study the factors affecting corporate bonds issuance in Nepal
b) To study the future prospects of corporate bonds market in Nepal
4. METHODOLOGY
Research Design
The research study attempts to analyze the problems and prospects of debt market growth in Nepal. Hence to fulfill the objectives of the study, it used both primary data as well as secondary data along with the analytical and quantitative approaches are used to examine the issue.
Population and Sampling
In order to collect the required information from the investors, the sampling design was carefully decided and properly chosen for the study. The sample size covered 35 investors various broker houses in Kathmandu.
Source of Data
This paper is based on Primary data. The source of primary data is mainly questionnaire methods. The set of questionnaire is developed for various respondents. The main sources of primary data are following:
* 35 Individual Investors
Data collection methods:
Primary data was gathered through questionnaires and personal interviews depending on the convenience of the respondents most of whom were individual investors and institutional investors in market.
Data analysis techniques:
The primary data has been collected by the questionnaire collected by questionnaire. Tabulation, Processing, graphical and tabulated presentationof data have done with computer application MS excel.
Data collected was quantitatively and qualitatively analyzed; Quantitative data was analyzed by using Statistical Package for Social Sciences (SPSS) software.Regression analysis was done to establish the contribution of each independent variable to the dependent variable; the dependent variable was the decision to invest in corporate bonds while the independent variables were corporate bonds restrictive covenants, primary and secondary market lack of liquidity and lack of corporate bonds information and knowledge among investors. Correlation analysis was conducted to establish whether the relationship between the dependent variables and...

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