Drivers of Corporate Bond Market Liquidity: Evidence from Pakistan

Abstract

This study examines the factors that contribute to corporate bond market liquidity using the data of Term Finance Certificates from March 2009 to March 2018. The results of summary statistics indicate that majority of trades are carried out in large issue and high credit rating corporate bonds. The regression results indicate that the most important derivers of bond trading volume are the issue size of bond, bond market rating, market interest rate, bond price volatility and equity market conditions. The results of this study lead to the implications that authorities should take steps to improve the bond market in general and promote the flow of trading of these bonds in a centralized way. This will help the policy makers as well as the market participant for making investment decisions.