Open AccessDO INDONESIAN MANAGERS TIME THEIR CORPORATE BONDS?
Author(s) -
Christine Andreani,
Dewi Tamara
Publication year - 2013
Publication title -
journal of applied finance and accounting/journal of applied finance and accounting
Language(s) - English
Resource type - Journals
eISSN - 2746-6019
pISSN - 1979-6862
DOI - 10.21512/jafa.v5i2.793
Subject(s) - bond , bond market , debt , business , indonesian , interest rate , government bond , capital market , monetary economics , financial system , government (linguistics) , accounting , economics , finance , linguistics , philosophy
Corporate bonds are becoming popular in Indonesian capital market due to the ongoing decline in interest rates and the increase in credit rating. Debt Market Timing Theory argues that managers try to time their bonds issuance according to the market interest rate, relatively. This paper aims to analyze the debt issuance timing profile of Indonesian public listed companies. The samples are 24 bonds issuances, which have maturity period between 3 to 7, and companies already issued more than 1 bond issued within year 2009 and 2011. The manager’s behavior to time government bond rates is observed in the 5 working days window, whether the corporate bonds being issued at the lowest market interest rate (i.e., government bond rates) on the window. Bootstrap method is utilized to construct counterfactual data. The research finds that 7 out of 24 bonds issuance were issued at the lowest government bond yield within the window. Indonesian public listed companies had no ability to time their bond issuances during period 2009 until 2011. This paper reveals that the frequency of bond issuances made by each Indonesian company does not necessarily determine their capability to time government bond rates. However, bootstrap is a useful and more robust tool to help assessing the debt market timing ability when the samples taken are small in numbers.