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have committed an assessment offence.

Student ID: ____________12345678_____________________

Level of Study: ____________Post Graduate_________________

Module Title: ____________Dissertation_______________

Course Title: ____________MAITF1_______________________

Module Tutor : ____________ABC_______________

Student Name: ____________ABC_____________

Student Signature: ____________Anh__________________________

Date of Submission: ____________March 14th, 2010________________

Name of first marker: Mark:

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ID: 123456789

14th March, 2010

Table of contents

1.1.0 Background of study 4

1.1.1 Structure of literature review 6

1.2.0 Significance of study 6

1.3.0 Research questions and objectives 7

1.3.1 Research questions 7

1.3.2 Research objectives 7

1.4.0 Research methodology 8

1.4.1 Research design 9

1.4.2 Data collection 9

1.4.3 Ethical permission 9

1.5.0 Time scale 9

1.6.0 Resources 10

References 11

Appendix 1 12

1.1.0 Background

The corporate bond market is an important link between savings and

investments with the publicly traded debt instruments issued by borrowers
to raise capitals from a wide range of diverse investors.

There have been a lot of studies on the role of corporate bond market.
Hankansson (1999) showed that an economy with a developed corporate
bond market has stronger market discipline than an economy in which bank
financing plays the central role. A developed corporate bond market entails
greater disclosure of information and transparency, a strong community of
professional financial analysts, good rating agencies, a large number of
corporate debt instruments leading to the rising demand for credit analysis,
and efficient corporate reorganization or liquidation processes, allowing
market forces to function more effectively. As a result of the effective
corporate bond market, the systemic risk and the probability of a crisis may
be lowered. Diamond (1991) and Rajan (1992) mentioned the cost
advantages of borrowing in the bond market over bank lending. On
condition that banks’ loans are decided based on firms’ creditworthiness,
the bond issuance allows the firm to avoid the monitoring costs for banks
and to reduce the information rent possibly charged by banks.

Pipat Luengnaruemitchai and Li Lian Ong (2005) identified crucial elements

for the corporate bond market development, namely benchmarking,
corporate governance and transparency, credit risk analysis and pricing,
and the development of hedging instruments. In addition, they also studied
about factors affecting the demand for and supply of corporate bonds,
including local as well as foreign investor base, issuance costs, taxation, and
government policies related to issuance process.

In the case of Vietnam rated as the BB-credit country, bank lending and
equity finance are the major financing options for the corporate sector.
Although the private Small-and-Medium-sized-Enterprise sector is regarded

as the main source of Vietnamese sustainable growth in the long run, using
those financing options in large scale has been out of small firms’ reach
(Vuong, quan Hoang and Tran, Tri Dung, 2010).

In addition, in Vietnam, there are three kinds of bonds, namely government

bonds issued by State Treasury or Vietnam Development Bank, municipal
bonds issued by three local governments including Hanoi, Ho Chi Minh City
and Dong Nai, and corporate bonds. Government bonds still dominate the
market with 86% and the rest 14% is divided equally for corporate bonds
and municipal bonds (Source: Ministry of Finance of Vietnam.)

The Vietnamese corporate bond market has witnessed the strong growth
particularly since Vietnam entered WTO. However, this market still remains
underdeveloped with the small size compared to government bonds or the
very tiny percentage of GDP. Up to now, there have been about 63 firms
issuing 152 bonds, accounting for 31.5% of the 200 largest corporations of
Vietnam and a small portion of 350,000 enterprises existing in Vietnam. It
is obvious that Vietnamese corporate bond market is now dominated by
State-owned Enterprises and large corporations, which keeps SMEs from
this debt financing option (Vuong, Quan Hoang and Tran, Tri Dung, 2010).
Listed corporate bonds may be traded in the secondary market on the Hanoi
Security Trading Center or HCMC Stock Exchange. However, the secondary
market is still small and illiquid with a few players; and the majority of
corporate bonds issued are unlisted.

There are very few studies on the causes of the underdevelopment of

Vietnamese corporate bond market. In the capital market diagnostic review
of Vietnam, Thai Thu Hong and Margarete O.Biallas mentioned some
reasons for the underdevelopment of Vietnamese corporate bond market,
for examples, the lack of awareness of Vietnamese corporations about bond
instrument, inexperienced intermediation service providers, or expensive
corporate bond issuance due to rules and procedures.

A study conducted by Jonathan A. Batten and Peter G. Szilagyi emphasized

Japan’s demand for the corporate bond market development and raised the

obstacles for the development of Japanese corporate bond market in
particular and financial markets in general. Some impediments for corporate
bond issuance in corporate bond markets include poor credit ratings, strict
rules and procedures which result in the limited quality bond issuer supply.
“Inadequate market infrastructure including competitive auctions secondary
market trading systems, and clearing and settlement systems” and a
narrow investor base caused by limited savings schemes, undeveloped
investment trusts, the over-regulated asset management industry and the
limitation in insurance companies’ role are other impediments that need to
be considered.

Krishnan Sharma (2000) also issued the paper focusing on “the underlying
institutional constraints to corporate bond market development in Thailand,
Malaysia and Indonesia”. The results of the paper showed that the close and
“interlocking relationships” among corporations, banks and governments
were one of the main reasons for the underdevelopment of the demand side
of the corporate bond market and have prevented companies from issuing
bonds. Based on the results, the author recommended the strong
institutional change as the major solution to develop the corporate bond
market in those countries besides the measures to strengthen market

1.1.1 Structure of literature review

1. Corporate bond market

1.1. Role of corporate bond market
1.2. Factors affecting the demand for and supply of corporate bonds
1.3. Crucial elements for corporate bond market development
2. Background of the case – Vietnamese corporate bond market
2.1. Access to capitals in Vietnam
 Bank lending
 Vietnamese equity markets
 Other financing mechanisms
2.2. Vietnamese bond market
2.3. Vietnamese corporate bond market

 Vietnamese corporate bond market structure
 Regulatory Framework
 Opportunities and challenges

1.2.0 Significance of study

In Vietnam, the majority of the corporate sector is classified as Small-and-

Medium-sized Enterprise but these SMES always meet difficulties in raising
capital in large scale through bank lending, share issuance, and other
financing mechanisms like leasing. This fact requires the further
development of corporate bond market to provide enterprises with another
financing vehicle. The study focuses on the situation of Vietnamese
corporate bond market over the past twenty years and the reasons why this
market still remains underdeveloped in order to contribute concrete
recommendations for the further development of this market. The study will
provide the deep analysis of the facts preventing Vietnamese corporate
bond market development that helps to find out solutions to develop
Vietnamese corporate bond market, which is useful for corporations to
diversify their funding sources.

1.3.0 Research questions and objectives

The following research questions and objectives will be covered in this

1.3.1 Research questions

1. What is the situation of Vietnamese corporate bond market over

the past twenty years?
2. What are the causes of the underdevelopment of Vietnamese
corporate bond market?
The research wants to study the situation of Vietnamese corporate bond
market over the past twenty years and find out the causes of the
weaknesses of the market. Based on the analysis of those reasons, the
research will recommend the relevant solutions to develop this market.

1.3.2 Research objectives

1. To examine the situation of Vietnamese corporate bond market

and prove the underdevelopment of that market.
2. To find out the reasons for the underdeveloped situation of
Vietnamese corporate bond market.

To achieve the first objective, the researcher will analyse existing data sets
related to Vietnamese bond market and Vietnamese corporate bond market
and compare those data with ones about other developed corporate bond
markets to prove the underdevelopment of Vietnamese corporate bond

In terms of the second objective, the researcher will make use of some
literature and surveys. Interviews and questionnaire items will be designed
so as to collect data on the experts’ assessment about Vietnamese
corporate bond market and the reasons making this market underdeveloped

1.4.0 Research methodology

This section will show the procedures of the study and method as well as
instruments applied to collect data, analyse them and draw conclusions.

1.4.1 Research design

The study applies both quantitative and qualitative approach. The

researcher chooses case study method with the case of Vietnamese
corporate bond market. The researcher will collect not only secondary data
taken from different sources but also primary data based on questionnaires
and interviews.

The researcher will sample financial employees in large companies,

financial organizations, and SMEs, the financial managers of some publicly
listed companies or financial organizations, and some financial lecturers.

1.4.2 Data collection

Secondary data, for examples, statistics about Vietnamese corporate bond
over the past years, will be collected from some sources such as Ministry of
Finance of Vietnam, IMF, World Bank, ANZ, Vietnamese Bond Market
Association, and previous studies. In addition, the researcher will deliver 50
questionnaires to financial lecturers at Academy of Finance and financial
employees in large companies, SMEs, and financial organizations, for
examples, Vietnamese Bond Market Association, World Bank in Vietnam,
BIDV, Vietcombank, Bao Minh Insurance Corporation. Five interviews will be
also conducted with the financial managers of above publicly listed
companies and financial organizations.

These methods are used with the purpose of examining the situation of
Vietnamese corporate bond market over the past twenty years and finding
out the reasons for the weaknesses of this market.

It is predicted to take the researcher six weeks to collect data: one

interview/day plus questionnaire administration (4 weeks); secondary data
collected for 2 weeks.

After accomplishing the data collection stage, the researcher will flexibly
choose the method to analyse data under the instructor’s guidance.
Nvivo software and Statistical Package for Social Science software may be
used to analyse responses to questions of questionnaires and interviews if
the researcher is instructed to get to know how to use these programs.

Data will be presented in tables, graphs, charts, etc, based on which

findings will be inferred so that the researcher will draw conclusions and
contribute appropriate recommendations.

1.4.3 Ethical permission

The researcher guarantees the authorized access to the secondary data and
the permission of respondents before carrying out surveys like interviews
and questionnaires. The name of or other confidential information about the

respondents will not also be required as that is unnecessary for data
analysis or viability of the study.

The copy of Research Ethics Release Form is attached in Appendix 1.

1.5.0 Time scale

This study is divided into four stages and the duration of each stage in
particular and that of the study in general are predicted as follows:

Stages Study Duration

1 Review of literature 4 weeks
2 Data collection 6 weeks
3 Data analysis and presentation 6 weeks
4 Research conclusion and 4 weeks

It is flexible to change the duration of study subject to the situation of study

or unpredictable problems occurring during the research process

1.6.0 Resources

The researcher’s research process will be carried out with the resources
such as a laptop computer, an electronic voice recording device, internet,
online library, and finance.

The researcher also requires the support of the instructor Peter Sorensen,
the lecturer of Academy of Finance. In particular, the researcher needs the
instructor’s guidance of how to use software to analyse data, for examples,
Nvivo, SPSS, or others.


1. Hakansson, Nils H. (1999) The Role of a Corporate Bond Market in
an Economy -- and in Avoiding Crises. UC Berkeley: Research Program
in Finance. Available from: <>
2. Diamond,D.W. (1991) Monitoring and Reputation: The Choice between
Bank Loans and Directly Placed Debt. Journal of Political Economy,
99(4), pp. 689–721.
3. Rajan, R.G. (1992) Insiders and Outsiders: The Choice between Informed
and Arm’s Length Debt. Journal of Finance 47(4), pp. 1,367–1,400.
4. Ong, Li L. and Luengnaruemitchai, Pipat. (2005). An Anatomy of
Corporate Bond Markets: Growing Pains and Knowledge Gains. IMF
Working Papers No. 05/152, July, pp.1-25 (25)
5. Sharma, Krishnan (2000). The Underlying Constraints On Corporate
Bond Market Development in Southeast Asia. United Nations DESA
Working Paper No. 14, September, pp 1405 – 1419. Available from:
6. Vuong, Quan Hoang and Tran, Tri Dung (2010). Corporate bond
market in the Transition Economy of Vietnam, 1990-2010. Centre
Emile Bernheim Working Paper Series: WP-CEB No. 10/001. Université Libre
de Bruxelles.
7. Jonathan A. Batten, and Peter G.Szilagyi. (2003) Why Japan needs to
develop its Corporate Bond Market. Economics of Business, Vol. 10, No.
1, pp. 83–108.

Appendix 1:

Low risk project involving human subjects


Programme: MAITF

Project Title: Vietnamese corporate bond market:

The causes of underdevelopment

Human Subjects Involved

The participants include 5 financial managers of financial organizations such as World
Bank in Vietnam and Vietnamese Bond Market Association and of large corporations
including BIDV, Vietcombank, and Bao Minh Insurance Company, 40 financial
employees in the above financial organizations and large corporations, 5 financial
managers of SMEs, 5 financial lecturers of Academy of Finance.
The researchers will take advantage of the relationships with relatives, friends, and
especially the classmates in MAITF1 class in Vietnam. For example, the researcher’s
sister works in the field of stock market, so she can help me contact with some in
Vietnamese Bond Market Association. In addition, the researcher’s father works for
Bao minh Insurance Company and the researcher’s classmates works for World Bank in
Vietnam, BIDV, Vietcombank and other companies. The researcher also works for a
small enterprise, Da Hinh Ltd. Finally, the researcher can ask AOF administration office
to contact with some financial lecturers.
Student Undertaking
I confirm that I am proposing to undertake this research project in the manner described.
I understand that I am required to abide by the terms of this approval throughout the life
of the project. I also understand that I may not make any substantial amendments to this
project without consent; and that if I wish to make significant amendments to the
project I will seek approval for this immediately, and will not undertake such research
unless and until approval is granted. I understand that if I infringe the terms of this
approval my work may not be marked.

Signed Date

ABCDEF 14th March, 2010

Supervisor’s agreement
Name Signature Date

XYZ………… XYZ………… 13th March, 2010

Approval– Research Ethics Co-ordinator

Name Signature Date

This form will be retained for the purposes of assurance of compliance and audit for the duration of the
research project and for five calendar years thereafter.