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Business groups, which are collections of publicly traded companies with significant amount of common ownership, dominate private sector activity in developing countries. This paper studies how information flows within these groups by analyzing the trading behavior of pension fund managers in firms that belong to the same group. The paper shows that while pension fund managers are momentum traders on non-affiliated companies, they trade in anticipation of future abnormal returns in affiliated firms. Ownership concentration and business group ties exacerbate information asymmetries, discouraging investment and depressing stock market participation. Using the merger and acquisition activity among pension fund managers as a natural experiment, the paper provides evidence that increases in stock ownership concentration, via the threat of informed trading, adversely affect liquidity. The results indicate that cross-ownership structures and extensive investor-industry relations might curb the expected benefits from the presence of institutional investors, limiting market development.

This background note is intended to assist debt management offices (DMOs) in assessing whether a bond placement scheme combining auctions and syndications is an appropriate strategy in their markets and, if so, to assist them in designing the corresponding procedures.

Thesis aim of this draft background note is to provide public debt managers with an overview of the matters that need to be considered by debt management offices planning to provide a securities lending facility to their primary dealers.

There are three stakeholders in a public-private partnership (PPP), (a) the government in office, (b) private firms (financial and non-financial) and investors (individual and institutional), and (c) final beneficiaries (taxpayers or users, present and future). The raison detre of PPPs is threefold: (i) to crowd in private firms and investors into projects that they will otherwise not undertake; (ii) to transfer to the private sector a significant part of the risks and costs that the government would otherwise fully absorb; and (iii) to ensure that the projects efficiency/quality is at least equal to that obtained if the government alone carried all costs and risks. Important (yet often ignored) implications follow. First, outsourcing (e.g., construction and maintenance) to the private sector does not by itself constitute a PPP if all risks and costs are, in one way or another, still borne by the government. Second, a PPP does not reduce total risk; it simply distributes it differently, involving private sector firms and investors. Third, the total costs borne by the final beneficiaries would be lower under a PPP (compared to a project whose costs and risks rest completely in the governments balance sheet) only if the PPP achieves efficiency gains; otherwise, what beneficiaries save in taxes they will pay in user fees, although, under a PPP, more of the costs would be assigned to direct beneficiaries/users, than to taxpayers at large. Fourth, that a PPP can provide (cash) budget relief may be a welcome corollary for the government in office but it is not a core objective of a PPP.

Repo markets are an essential component of liquid Government debt markets, acting as a transmission belt between money and debt markets, as well as serving to conduct key functions for the efficient operation of debt markets. These include, among others, credit risk management, funding debt portfolios, playing the yield curve, and covering short positions and settlement fails. The hybrid nature of a repo between a collateralized loan and a full transfer of ownership makes it a very versatile instrument for a broad range of market participants with very different business models. However, this is at the same time the reason for its complexity. This note addresses the legal, structural, accounting, tax, regulatory and infrastructure factors that are decisive for repo market development. The legal and infrastructure factors that underpin repo markets functionality are evolving ones and may be different depending on the country. The perspective adopted in this note intends to provide a balanced account of both the conceptual issues in each topic and relevant country cases, with the objective of providing policy makers with analytical tools to address their country specific context.

The debt market in Thailand has made important strides since the financial crisis of 1997. The Thai government has made significant progress in building an orderly yield curve and is beginning to establish some benchmarks. However, more needs to be done if the government is to achieve its objective of enhancing liquidity in the market. In particular, liquidity in the secondary market would be enhanced by reducing the frequency of auctions, while increasing the size of each individual offering. Such a change will require primary dealers to change their mode of operation from effectively a broking operation to the provision of greater underwriting and market making services; consequently a review of the primary dealer system is warranted. Nevertheless, prospects for development of the government securities market will be constrained overall by the likely limited financing need going forward, unless the authorities can secure some additional flexibility to restructure the existing portfolio or otherwise establish more meaningful benchmarks. The corporate debt market suffers from too few issuers of corporate debt and too little diversity of debt offerings. This reflects, in part the limited corporate need for long-term financing, the ready availability of alternative financing by commercial banks at competitive rates, and regulatory policies that emphasize investor protection by imposing substantial limitations on the ability of institutional investors to purchase anything but investment grade debt, which effectively precludes issuance of below investment grade debt.