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Baltic region is traditionally treated as similar and comparable when analysed on the macroeconomic level. The major difference is faced when the analysis is performed for the corporate bond market – the weight of Latvian publically traded corporate bonds among the three countries- Latvia, Lithuania and Estonia- reached 94% by the number of issues quoted. With 47 corporate bonds listed in Nasdaq Riga, Latvian corporate bond market demonstrated the rapid growth and recognition of corporate bonds as the source of alternative to bank lending financing method (Nasdaq Baltic, 2017). There are no obvious macro or microeconomic evidence for Latvia meeting more favourable conditions for corporate bond market development than Lithuania and Estonia The increasing role of the capital market as the alternative to the traditional to Europe banking sector is strongly supported by the European Commission (EC). In 2015 the EC announced the Capital Market Union (CMU) initiative and respective action plan as the reaction to the challenges faced by both banking sector and small and medium enterprise (SME) segment in Europe. As integrated and more diverse capital markets will decrease the cost of funding for companies, the objective of the CMU is to make the financial system more resilient in all 28 Member States including Latvia, Lithuania and Estonia (European Commission, 2017). While several steps like proposal to modernise the Prospectus Directive have been made, further actions based on the review of regulatory barriers to SME admission on public markets and SME growth markets and review of European Union corporate bond markets, focusing on how market liquidity can be improved made in 2017 will follow (European Commission, 2015). The aim of this article is to analyse the level of development of the biggest Baltic corporate bond market- Latvian corporate bond segment and to reveal the potential CMU introduction effect. The paper applies Financial Sector Development Indicators (FSDI) framework developed by The World Bank (World ...

While the development of the Baltic corporate bond market is based on the uncovered bond segment, the elaboration of the legislative base has a devoted emphasis on the covered bonds. The shift from a country-focused to the pan-Baltic-focused capital market has been publicly acknowledged by the governments (Ministry of Finance of the Republic of Latvia, 2018) and is in line with the ongoing Capital Markets Union initiative of the European Commission (The High Level Forum on the Capital Markets, 2020). Moreover, a pan-Baltic covered bond legal and regulatory framework has been initiated (Ministry of Finance of the Republic of Lithuania, 2019). The strong demand for the corporate bond segment in the Baltics (the average number of issues listed in the period 2009-2019 reached 44) where no covered bonds are traded on Nasdaq Baltic (Nasdaq Baltic, 2020) creates the need for a unification of the uncovered corporate bond legislation. The existing academic research is relatively modest on analysing legal frameworks of corporate bond issuance. The studies examine the division between domestic and international (typically Eurobonds) legal issuance frameworks with more focus on the legislative frameworks as related to the terms of issuance. Few articles consider a new supranational bond issuance framework, while the interpretation of the issue is radically diverse. There is no existing academic research on the legal framework of the uncovered corporate bond issuance in the Baltics. The aim of this research is to reveal the feasibility of the development of a pan-Baltic uncovered corporate bond issuance framework by analysing the existing legal and regulatory documentation of the corporate bond issuance in the Baltic states. The research provides a limitation for the corporate bond issuance process legislation in the form of information disclosure requirements and the prospective situation of a default of an issuer. The research presents the primary data analysis of the in-depth interviews with pan-Baltic legal professionals in the corporate bond issuance segment conducted in the period December 2019-March 2020. The research demonstrates that the concern of the information disclosure for the issue of corporate bonds is covered under the new regime of the Prospectus Regulation, where further harmonisation of the smaller scope of issues is needed. The national insolvency laws in the Baltics are yet different and need to be harmonised for the default of the issuer. In the result of the research, the idea of a proposal for a pan-Baltic legal and regulatory framework for uncovered corporate bond issuance is evaluated as feasible action corresponding both to the goals of the Capital Markets Union and a pan-Baltic capital market development. The research methods used in this article are scientific publication analysis, document analysis, and in-depth interviews.

While the development of the Baltic corporate bond market is based on the uncovered bond segment, the elaboration of the legislative base has a devoted emphasis on the covered bonds. The shift from a country-focused to the pan-Baltic-focused capital market has been publicly acknowledged by the governments (Ministry of Finance of the Republic of Latvia, 2018) and is in line with the ongoing Capital Markets Union initiative of the European Commission (The High Level Forum on the Capital Markets, 2020). Moreover, a pan-Baltic covered bond legal and regulatory framework has been initiated (Ministry of Finance of the Republic of Lithuania, 2019). The strong demand for the corporate bond segment in the Baltics (the average number of issues listed in the period 2009-2019 reached 44) where no covered bonds are traded on Nasdaq Baltic (Nasdaq Baltic, 2020) creates the need for a unification of the uncovered corporate bond legislation. The existing academic research is relatively modest on analysing legal frameworks of corporate bond issuance. The studies examine the division between domestic and international (typically Eurobonds) legal issuance frameworks with more focus on the legislative frameworks as related to the terms of issuance. Few articles consider a new supranational bond issuance framework, while the interpretation of the issue is radically diverse. There is no existing academic research on the legal framework of the uncovered corporate bond issuance in the Baltics. The aim of this research is to reveal the feasibility of the development of a pan-Baltic uncovered corporate bond issuance framework by analysing the existing legal and regulatory documentation of the corporate bond issuance in the Baltic states. The research provides a limitation for the corporate bond issuance process legislation in the form of information disclosure requirements and the prospective situation of a default of an issuer. The research presents the primary data analysis of the in-depth interviews with pan-Baltic legal professionals ...

In the period 2017-2022, there has been a notable growth in international bond placements by Baltic companies, which is distinct from corporate bond issuance in the European Economic Area. While the Baltic governments have demonstrated an increased focus on the corporate bond market development – the pan-Baltic Capital Markets Union launched in 2017 and covered bond law as adopted in Latvia in 2021, those activities are not directly linked to the ongoing shift to international corporate borrowing. In the academic literature, the determinants affecting corporate bond issuance are getting certain attention while studying separately the country-level determinants and the firm-level determinants, which are further split into domestic and international corporate bond issuance. For the Baltic countries, rare academic research has focused on the corporate bond market development of an individual Baltic country.
This paper aims to discover the determinants for domestic and international corporate bond issuance of Baltic companies. While providing theoretical insight into corporate bond issuance rationale for both domestic and international placements, the paper focuses on factors that have contributed to firms choosing to issue bonds internationally. The methods applied in this study are scientific publication analysis, document analysis, expert survey, in-depth interviews, and statistical data analysis. For the statistical analysis, macroeconomic data was acquired from Cbonds, The World Bank, and International Monetary Fund databases in combination with company-specific data gathered from Nasdaq CSD, Orbis, Lursoft, Storybook, and Rekvizitai. The authors have employed a panel regression model for domestic and international bond issuance, and probit regression for all issued bonds in the Baltics from 2003-2022 to estimate the probability of pursuing bond financing internationally.
The findings of this paper indicate that in the Baltics the main firm-level determinants for domestic corporate bond issuance are the company's financial performance, its geographic exposure, documentation and listing costs, and access to alternative funding sources; on the country-level, the determinants are the share of sovereign international bonds of GDP, corruption perception, and exports as a share of GDP. For issuing international corporate bonds, the main determinants on the firm-level are bond placement size, company size, equity ratio, a satisfactory credit rating, and appropriate yields in the context of higher competition for international investor attention; on the country-level, GDP per capita, country's export share, interest rate spread, regulatory quality, and political stability play an important role.

In the period 2013-2017 Latvian corporate bond market had experienced the abrupt growth of the number of public Latvian corporate bond issues outstanding. The base of the expansion was formed by the financing activity of Latvian financial sector issuers (FSIs) with their weight in the pool of corporate bond issues listed in Nasdaq Riga at 85%. In 2019, FSIs remain the main issuer in Latvian corporate bond market (64% of the number of issues (Nasdaq Baltic, 2019)). The financing needs and preferences of the FSIs not only shape the segment profitability but also build Latvian corporate bond market sustainability.
Academic papers provide broad motivation for corporate debt issuing: an efficient competition to bank funding, long-term financing, improvement of the cash flow by decreasing the cost of debt, optimization of the financial structure, and efficient ownership structure. The existing academic research is modest on the analysis of the FSI segment as the issuer segment in the debt market where academics do analyse the corporate bonds issuance by the FSIs where motivating factors stimulating FSIs to come to the public debt market are seldom separated while size and characteristics of the issuers are mostly scrutinised.
The aim of this article is to analyse the determinant of the development of the FSI segment of the corporate bond market in Latvia by defining the factors stimulating the bond issuing decision as made by the FSI segment. This article provides primary data analysis of both survey and in-depth interviews with Latvian FSI segment representatives run in the period June-August 2017. The results of the analysis indicate that bank borrowing is not treated as the funding alternative for FSIs where issuing debt and equity funding are the recognised funding sources of the FSI segment. The growing role of the peer-to-peer platform financing is recognised and will further influence the FSI segment alternative financing. The main factors motivating FSIs to come to the debt market are reputation a company gets as the result of the bond issue, strategical ambition to be present in the public market, cost of funding in the long-term (more than 3 years). The methods used in this article are scientific publication analysis, document analysis, expert survey, in-depth interviews, and statistical data analysis.

The development of the corporate bond market in Latvia while being quick and robust in the period 2012-2017 (the average growth rate 131%, median 44%), has faced major challenges in 2018 (Nasdaq Baltic, 2018). The latter has demonstrated the vulnerability of this alternative to banking financing method in Latvia. In the environment, where the ongoing changes in the banking financing as initiated by the Basel III and Capital Markets Union initiatives, besides to the decision on creation of pan-Baltic capital market with the support of the European Commission and the European Bank for Reconstruction and Development, are bringing more emphasis on the increasing role of the corporate bond market in Latvia; the need to understand its development and factors affecting this development is essential. The goal of this article is to explore the corporate bond market development frameworks as elaborated by the academic research and recognise corporate bond market development determinants, identify the determinants of the corporate bond market in Latvia by running the statistical analysis. Tasks of the research include examining types of corporate bond development frameworks with the focus on revealing the determinants of the corporate bond market development as recognised by the academics, performing the econometric analysis of the determinants selected and building an econometric model of the determinants of the development of the corporate bond market in Latvia as well as drawing corresponding conclusions. In order to accomplish the tasks of the research the following research methods were used: analysis of the previously performed research, analysis of the legislative framework; quantitative research methods: statistical data analysis of macroeconomic data from Bank for International Settlement, The World Bank Database, Bloomberg and Reuters databases; financial market indicator and data analysis from Nasdaq Baltic, Bank for International Settlement, Treasury of the Republic of Latvia, Bloomberg and Reuters databases; ...