This chapter first provides an overview of the Asian non-financial corporate sector in the last two decades. Using firm‑level data, it offers an analysis of trends in financing structure, performance, investment activity and payout policies. It then provides long-term trends on how Asian corporations have used market-based financing by issuing equity and corporate bonds. Finally, the chapter examines the ownership structure of listed companies in the region, identifying the main investor categories and how they invest. These long-term trends provide a starting point for understanding the effects of the pandemic and the challenges ahead.
Corporate Finance in Asia and the COVID-19 Crisis
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1. Corporate landscape
Abstract
1.1. Corporate sector overview: Capital structure, performance and investment
The non-financial corporate sector plays a major role in the economy. Although listed non‑financial companies represent only a small fraction of the total number of companies globally, they are significant players in the world economy. Their market capitalisation reached USD 87.7 trillion (United States dollar) by the end of 2020, equivalent to total world GDP (Table 1.1). In particular, the number of non-financial listed companies in Asia has grown dramatically in recent years, from 11 649 companies in 2005 to 18 366 in 2020, representing over half of the total number of non‑financial listed companies around the world and almost one‑third of the total market capitalisation. The growth of Asian economies has been largely driven by the non-financial sector and fuelled by a large wave of investment flowing into the region in recent years. Between 2011 and 2020, Asia attracted over one‑third of global foreign direct investment (UNCTAD, 2021[1]).
Using standardised financial information for listed companies, the following section provides a comparative analysis using some key indicators. To provide an overall comparative analysis, it uses financial information from approximately 31 000 non‑financial listed companies from around the world.
Table 1.1. Non-financial listed companies as of end‑2020
|
Market capitalisation (USD trillion) |
Leverage |
ROE |
ROA |
Turnover |
Investment ratio |
Number of companies |
---|---|---|---|---|---|---|---|
World |
87.7 |
31.6% |
5.7% |
2.2% |
58.2% |
5.2% |
30 914 |
Asia |
27.9 |
29.2% |
5.8% |
2.6% |
61.1% |
5.4% |
18 366 |
China |
13.8 |
28.3% |
6.3% |
2.8% |
59.4% |
5.8% |
4 562 |
Japan |
6.1 |
29.0% |
6.2% |
2.6% |
65.4% |
5.1% |
3 528 |
India |
1.9 |
32.4% |
8.9% |
3.6% |
61.0% |
4.6% |
2 581 |
Korea |
2.0 |
27.9% |
3.7% |
1.9% |
63.7% |
6.8% |
2 221 |
ASEAN |
1.6 |
37.4% |
1.8% |
0.8% |
51.5% |
3.7% |
2 988 |
Rest of Asia |
2.5 |
27.5% |
5.7% |
2.8% |
59.0% |
4.8% |
2 486 |
Note: Leverage is measured as total financial debt divided by total assets. Turnover ratio is measured as total sales divided by total assets. Investment ratio is measured as the sum of capital expenditure, and research and development (R&D) expenses over total assets.
Source: OECD Capital Market Series dataset, Thomson Reuters Datastream, see Annex for details.
The aggregate balance sheet of listed companies in Asia has expanded at a stable pace over time, driven by growth in both equity and liabilities. As shown in Panel A of Figure 1.1, at the end of 2020 the aggregate size of Asian listed companies’ balance sheets was USD 31.4 trillion. Equity, including retained earnings, represented 45% of total assets, which is slightly lower than the global level of 50% (OECD, 2021[2]). Liabilities, including both financial debt and non-financial debt such as accounts payables, tax payables and others, accounted for 55% of total assets (Figure 1.1 Panel B). The portion of financial debt has been stable over time, representing around 53% of total liabilities. In 2020, listed companies saw an increase in liabilities of USD 1.6 trillion, including an increase of USD 0.84 trillion in financial debt, largely driven by the companies tapping debt markets to resolve liquidity issues resulting from the COVID‑19 pandemic.
The significant increase in total assets has not translated into a similar growth in sales and profits. While total assets almost tripled during the 2005‑20 period, aggregate sales only doubled (Figure 1.1 Panel C). Indeed, Asian non‑financial companies’ assets have made up on average 34% of non-financial assets of listed companies globally between 2005 and 2020, while profits only accounted for 29% of the global figure over the same period (Figure 1.1 Panel D). Although there has been a pronounced increase in profits, particularly in 2017, the aggregate profit in 2020 was around USD 0.8 trillion, which is only 17% higher than in 2007. It is worth mentioning that due to the effective containment measures, in Asia the COVID‑19 crisis has not led to significant declines in sales and profits. From a global perspective, in 2020, Asian non‑financial companies’ share in global profits was 45%, showing strong signs of recovery while the rest of the world was still struggling with the disruptions caused by the pandemic.
Figure 1.1. Overview of non-financial listed companies in Asia
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Source: OECD Capital Market Series dataset, Thomson Reuters Datastream, see Annex for details.
The fact that the increase in companies’ assets has not been matched by an increase in sales suggests a decline in the operating efficiency of the non-financial corporate sector. For the world excluding Asia, the aggregate assets turnover ratio, measured as sales divided by total assets, decreased from 84% in 2005 to 64% in 2019 and experienced a sharp drop in 2020 to 56% (Figure 1.2 Panel A). Asia is no exception to this trend. Companies in advanced Asia saw their turnover ratios decrease from 96% to 75% over the 2005‑19 period, and it dropped further in 2020 to 64%. Similarly, emerging and developing Asian companies’ turnover ratios were 81% in 2005, 67% in 2019 and 59% in 2020. Companies in ASEAN economies show a similar trend, with even lower turnover ratios. The assets turnover ratio measures a company’s ability to generate sales with its assets and a lower ratio indicates that more assets are required to generate the same level of sales. Growth in total assets does not necessarily lead to growth in sales and profits if investments are not efficient. The recent decrease in operating efficiency could be driven by overcapacity in certain industries, as well as diminishing marginal utility of capital. Meanwhile, the increase in the number of zombie firms, defined as mature companies that are consistently incapable of covering their interest payments with their operating profits, has also led to resources being sunk in unproductive firms, dragging down operating efficiency (Banerjee and Hofmann, 2018[3]). It is also worth mentioning that in advanced Asian markets, non-financial listed companies generally have a higher asset turnover ratio and a lower profit margin compared to emerging and developing Asia (Figure 1.2 Panels A and B). In 2020, as a result of the pandemic, business sales dropped dramatically, leading to a significant decrease in both asset turnover and operating margins.
Driven by the decrease in operating efficiency and profit margin, overall firm profitability has declined over the 2005‑20 period. For emerging and developing Asia, the ASEAN economies and the rest of the world excluding Asia, return on assets (ROA) and return on equity (ROE), measures of aggregate profitability, have decreased over the last decade (Figure 1.2 Panels C and D). After a significant decrease during the 2008 financial crisis, both ROA and ROE picked up in 2010. In 2012, with the European sovereign debt crisis, profitability levels dropped substantially again, especially in emerging and developing Asia, as well as ASEAN economies, reaching their lowest levels in 2015 (Lee et al., 2013[4]). After that, profitability started to increase gradually before the pandemic hit. In 2020, firms in most regions experienced a sharp drop in profitability. Outside of Asia, ROA and ROE dropped by 2 and 5 percentage points respectively in 2020, resulting in profitability levels below the ones seen in 2009. Companies in advanced Asia, and emerging and developing Asia only experienced a modest drop in ROA and ROE. However, within the emerging and developing Asia category, companies in ASEAN economies experienced a more severe decrease in profitability, with a 2 percentage points drop in ROA and 5 percentage points drop in ROE.
Figure 1.2. Operating efficiency and profitability of non-financial listed companies
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Source: OECD Capital Market Series dataset, Thomson Reuters Datastream, see Annex for details.
Non-financial listed corporations across markets in Asia have witnessed a decline in both asset turnover and profitability over the last two decades (Figure 1.3). In terms of asset turnover, all Asian markets have experienced a drop of 20 to 30 percentage points over the 2005‑20 period, indicating lower efficiency. In terms of profitability, China and India have seen significant decreases in profits over time. Meanwhile, corporations in developed markets, such as Japan and Korea, saw a sharp drop in profitability during the 2008 financial crisis. With a gradual recovery in recent years, in 2018 both countries reached their highest profitability levels. However, in 2019, with the prolonged trade frictions between the United States and China, listed firms in Korea and Japan suffered a sharp drop in profit levels. The effect was particularly strong in Korea, a highly export-dependent economy, where the corporate sector experienced a drop of 4 percentage points in ROA. In 2020, despite the COVID‑19 pandemic, listed companies in the countries shown in Figure 1.3 performed relatively well. Since the impact of the pandemic was mostly concentrated in firms in more contact-intensive services, which are mostly unlisted, listed companies were less affected by the pandemic. Particularly, Indian non‑financial listed companies saw a significant increase in profits, partially driven by a steep cut in corporate taxes from 35% to 26%, as well as cost cutting during the pandemic. Indeed, many firms deferred capital expenditure and internal cash flows were used to reduce debt (Fortune India, 2021[5]).
Figure 1.3. Profitability of non-financial listed companies from selected Asian economies
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Source: OECD Capital Market Series dataset, Thomson Reuters Datastream, see Annex for details.
A closer look shows a large difference in the distribution of profitability between Asia and the rest of the world over the 2005‑20 period (Figure 1.4). Both regions have around 60% to 70% of firms reporting profits below 5% or losses. However, a more detailed composition shows a completely different picture. In Asia, around 40% of firms fall into the profitability range of 0‑5%, and 25% of firms make no profits. In the rest of the world, these figures stand at 30% and 40%, respectively. Despite this, the share of companies reporting negative ROA increased from 19% in 2005 to 26% in 2019 and 28% in 2020.
Figure 1.4. Distribution of ROA of non-financial listed companies
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Source: OECD Capital Market Series dataset, Thomson Reuters Datastream, see Annex for details.
The declining trend in profitability has been driven to some extent by a decrease in the share of high‑profitability firms. As shown in Figure 1.4, in Asia the share of firms with ROA over 10% among all non-financial listed companies has dropped from 15% in 2007 to 11% in 2020. In the world excluding Asia, this drop is even more significant. After a drastic decrease in profitability following the 2008 financial crisis, the share of high‑profitability firms dropped from 16% to 12%. In the following years, despite the recovery, this share fluctuated around 13%, and then dropped to 10% in 2020. During the same period, the share of companies reporting negative ROA went from 37% in 2005 to 45% in 2019 and 50% in 2020.
This decline in the share of high-profitability firms can also be seen when measuring ROE (Figure 1.5). Outside Asia, the share of firms with ROE over 20% dropped from 16% in 2005 to 11% in 2020. For emerging and developing Asia, this drop is even more substantial, with the share of firms with ROE over 20% dropping from almost 20% in 2007 to 8% in 2020. The drop of high-profitability firms in ASEAN economies is also significant, as the total share of firms with ROE over 10% dropped from 38% to 24%.
Figure 1.5. Share of high-profitability non-financial listed companies by ROE
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Source: OECD Capital Market Series dataset, Thomson Reuters Datastream, see Annex for details.
The financing structure of non‑financial companies in Asia differs slightly from the structure in the rest of the world. Leverage, measured by financial debt over total assets, has been increasing in the rest of the world while in advanced Asia it has remained more or less stable over the period from 2005 to 2020 (Figure 1.6). In emerging and developing Asia, companies’ leverage increased gradually from 28% in 2007 to 32% in 2012 before a moderate drop to 30% by the end of 2020. In ASEAN economies, leverage has been on an increasing trend, reaching 37% in 2020, almost 10 percentage points higher than in 2007. A closer look shows that the median leverage has actually been much lower than the aggregate number, indicating that larger firms tend to be the ones with higher leverage ratios and that they are the ones driving the increase in aggregate leverage.
Figure 1.6. Leverage of non-financial listed companies
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Note: Leverage is measured as total financial debt divided by total assets.
Source: OECD Capital Market Series dataset, Thomson Reuters Datastream, see Annex for details.
As illustrated in Figure 1.7, the distribution of leverage has been consistent over time in advanced Asia, while in emerging and developing Asia, it has changed over time. For emerging and developing Asia, the share of firms with leverage below 10% has increased from 25% to 35% during the period 2005‑20, while firms with leverage over 20% decreased from 61% to 47%. By the end of 2020, both emerging and advanced Asian corporations showed similar leverage distributions, where around 10% of firms have a leverage ratio over 50%, with another 37% falling into the range of 20% to 50%. In ASEAN economies, despite the persistent increase in aggregate leverage observed in Figure 1.6, the leverage distribution has not changed significantly over time.
Figure 1.7. Distribution of leverage of non-financial listed companies
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Note: Leverage is measured as total financial debt divided by total assets.
Source: OECD Capital Market Series dataset, Thomson Reuters Datastream, see Annex for details.
Another common leverage indicator used to analyse companies’ ability to serve their financial debt and other commitments is the debt‑to‑EBITDA ratio, which measures a company’s indebtedness level against its revenue generation capacity, providing a proxy for the repayment capacity and debt sustainability of the borrower. A higher value reflects a lower capacity to service debt, and this measure is often used as financial covenants in loan contracts (Denis, 2014[6]). In 2005, the aggregate debt‑to‑EBITDA ratio was 2.4x for corporations in advanced Asia and 2.0x for those in emerging and developing Asia (Figure 1.8 Panel A). This ratio has been on the rise, and in 2019, it stood at 3.3x for corporations in advanced Asia and 3.4x for corporations in emerging Asia. The COVID‑19 crisis further drove down firm profits, increasing the respective debt‑to‑EBITDA ratios to 3.8x and 3.6x.
One important observation is that the share of companies in the higher risk category with respect to their ability to service their debt has increased significantly in the rest of the world, but not in Asia. In fact, during the 2005‑20 period, the share of firms with debt‑to‑EBITDA ratios over 4x increased from 12% to 21% for the rest of world, while in both advanced and emerging Asia it has fluctuated around 25% (Figure 1.8 Panel B). However, in the listed corporate sector in ASEAN economies this ratio has been increasing consistently from 18% in 2010 to 27% in 2020. Moreover, consistent with the distribution of profitability shown in Figure 1.4, Asian companies have a smaller share of companies with negative profits compared to companies outside Asia (Figure 1.8 Panel C).
Figure 1.8. Debt-to-EBITDA ratio of non-financial listed companies
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Note: EDA stands for Emerging and developing Asia.
Source: OECD Capital Market Series dataset, Thomson Reuters Datastream, see Annex for details.
However, even though Asia has not seen the same increase in the share of companies in the higher risk category as other regions around the world, there has been an accumulation of debt, in particular by firms with lower debt servicing capacity and in emerging and developing Asia. In fact, in emerging and developing Asia, the total nominal debt owed by firms with debt-to-EBITDA ratio over 4x increased from USD 0.3 trillion in 2005 to USD 2.7 trillion in 2019, and the pandemic has further increased this total to USD 2.9 trillion in 2020 (Figure 1.9). In ASEAN economies, this number has significantly increased from USD 0.1 trillion to USD 0.5 trillion. This development is similar to the rest of the world, where the debt held by firms with lower debt servicing capacity rose from USD 2.8 trillion to USD 6.8 trillion during the 2005‑19 period, and further to USD 8.3 trillion by the end of 2020. In advanced Asia, the debt accumulated in the higher risk category has been stable over time, and only surged during the 2008 global financial crisis and in 2019 when the listed companies in Japan and Korea experienced a sharp fall in profits.
Figure 1.9. Debt level of non-financial listed companies by debt-to-EBITDA ratios
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Source: OECD Capital Market Series dataset, Thomson Reuters Datastream, see Annex for details.
When looking at leverage at the economy level, measured as the debt-to‑assets ratio of listed corporations, only a few economies have seen significant increases since 2005 (Figure 1.10 Panel A). The most pronounced increase is observed in Singapore and the Philippines, where leverage rose by 12 and 7 percentage points respectively between 2005 and 2020. Indian corporations’ aggregate leverage ratio increased from 27% in 2005 to 36% in 2019, a number which dropped to 32% in 2020. In 2020 many firms used internal cash flows to cut debt as capital expenditure was deferred (Fortune India, 2021[5]). A larger increase in leverage is observed when looking at the debt‑to‑EBITDA ratio (Figure 1.10 Panel B). Indeed, most economies in Asia have seen an increase from around 2x to 3x during the period from 2005 to 2020. Specifically, corporations in Singapore experienced an increase in this ratio from 2.0x in 2005 to 5.1x in 2019, and 6.9x in 2020. In the Philippines, this number increased from 2.4x in 2005 to 4.1x in 2019 and further to 6.0x in 2020.
Figure 1.10. Debt ratio of non-financial listed companies by economy
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Source: OECD Capital Market Series dataset, Thomson Reuters Datastream, see Annex for details.
As shown in Figure 1.11, although the leverage ratio measured by debt-to‑assets has not increased significantly across industries, except for healthcare, almost all industries have experienced a large increase in the debt-to-EBITDA ratio. Industries including basic materials, energy, healthcare and utilities have experienced a pronounced increase in the debt‑to‑EBITDA ratio in the 2005‑20 period. In particular, the aggregate debt-to-EBITDA ratio for utilities surged from 3.8x in 2005 to 5.9x in 2020.
Figure 1.11. Debt ratio of non-financial listed companies in Asia by industries
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Source: OECD Capital Market Series dataset, Thomson Reuters Datastream, see Annex for details.
Increasing debt levels and a persistent decline in firms’ profitability have led to the rise of zombie companies around the world. These non-viable zombie firms are defined as mature firms that are consistently incapable of covering their interest payments with their operating profits (Adalet McGowan, Andrews and Millot, 2017[7]).1 In Asia, the share of zombie companies has also increased and this rise is especially prominent in Singapore, Korea, Malaysia, Indonesia and India (Figure 1.12 Panel A). In these economies, the average share of zombie companies between 2018 and 2020 has stood at around 12%, which is an increase of approximately 5 percentage points from the average between year 2010 and 2012. In Hong Kong (China) the ratio of zombie companies has been consistently high, with on average over 14% of companies identified as zombie companies between 2018‑20. These companies also make up a significant share of the total debt of listed corporations. In India, the share of debt in zombie companies’ balance sheets increased significantly and reached almost 20% of total listed companies’ debt between 2018 and 2020 (Figure 1.12 Panel B). In Indonesia, Singapore, Korea and Hong Kong (China), zombie companies represent around 5% of total debt. The presence of such non-viable companies is a sign of resource misallocation in the economy, and could deprive promising companies of financing opportunities and deter new entrants in the market.
Figure 1.12. Zombie companies by economy / region
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Source: OECD Capital Market Series dataset, Thomson Reuters Datastream, see Annex for details.
Non‑financial corporations represent a significant share of total investment globally, and listed companies are responsible for 40% of the non-financial corporate sector’s total gross fixed capital formation in OECD countries (OECD, 2021[2]). However, during the last decade, non-financial corporations’ investment activity has been sluggish, and Asia has not been the exception to this trend. Indeed, globally, capital expenditure over assets (capex ratio) dropped from 6.0% in 2005 to 4.6% in 2019, and the pandemic drove this ratio further down to 3.8% in 2020 (Figure 1.13 Panel A). In Asia, this number decreased from 6.8% to 4.1% over the 2005‑20 period. Similar trends can also be observed in Europe and the United States, with both regions experiencing declines in capital expenditure. It is worth noting that the corporate sector in Asia has been investing more in capex compared to Europe and the United States. The average capex ratio in Asia during the period 2005‑20 was 5.7%, compared to 4.8% in Europe and 5.0% in the United States.
Globally, the growth in investment in research and development (R&D) has been mainly driven by the corporate sector in the United States. The R&D ratio, measured by R&D over total assets, has risen from 2.6% in 2005 to 4.5% in 2020 in the United States (Figure 1.13 Panel B). This rise continued despite the pandemic. Meanwhile, in Asia the R&D investment ratio has fluctuated around 1.8% over the same period. In Europe, the ratio has decreased in recent years, dropping from 2.3% in 2014 to 1.8% in 2020. Importantly, the R&D ratio during the 2005‑20 period was on average 1.8% in Asia compared to 3.3% in the United States.
Figure 1.13. Corporate investment of non-financial listed companies by region
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Source: OECD Capital Market Series dataset, Thomson Reuters Datastream, see Annex for details.
Within Asia, capex and R&D of listed non-financial corporations differ significantly across jurisdictions and regions. As shown in Figure 1.14, capex has dropped significantly in almost all regions except Japan. This drop is particularly pronounced in China and India, where capex dropped almost 5 percentage points over the last decade. Korea also saw its capex ratio decrease from 8.4% in 2005 to 4.8% in 2020. On the contrary, the capex ratio in Japanese corporations fluctuated around 5% over the period. There are also significant regional disparities in the intensity of R&D investment. Non‑financial listed companies in China and Korea more than doubled their R&D ratios over the period. Indeed, in China it grew from 0.7% to 1.6%, while in Korea it increased from 1.0% to 2.1%. Even though Japan has seen a decline in R&D investments, its average R&D investment over the 2005‑20 period is the highest in Asia at 2.3%.
Companies’ investment activities also vary significantly depending on the industries they operate in. Energy, technology and utility companies have invested heavily in capex. As shown in Panel A of Figure 1.15, the average capex ratio over the 2011‑20 period was 7.4% for Asian listed companies in the energy industry and 6.7% in the technology sector. It is also notable that, except for the energy industry, in almost all industries Asian companies exhibit a higher capex ratio compared to companies in the rest of the world. Regarding R&D investment, the healthcare and technology industries have the highest R&D ratio, followed by consumer cyclicals. Importantly, the corporate sector in Asia still lags behind other regions in R&D investment, especially in the healthcare and technology industries. As shown in Panel B of Figure 1.15, the average R&D ratio for the Asian corporate sector was 5.4% for healthcare and 3.2% for technology, compared to 6.2% and 4.9% respectively for the rest of world.
Figure 1.14. Corporate investment of non-financial listed companies in Asia
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Source: OECD Capital Market Series dataset, Thomson Reuters Datastream, see Annex for details.
Figure 1.15. Corporate investment, average by industry (2011‑20)
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Source: OECD Capital Market Series dataset, Thomson Reuters Datastream, see Annex for details.
Dividends have grown steadily over the period 2005‑20, both in Asia and the rest of the world (Figure 1.16). This trend has been particularly marked for the corporate sector in emerging and developing Asia, where the aggregate amount paid in dividends surged from around USD 44 billion in 2005 to over USD 274 billion in 2020. The dividend payout ratio more than doubled from around 30% during 2005‑10 to 60‑70% during 2011‑20. It is also important to note that during the financial crisis and the COVID‑19 pandemic, firms continued paying dividends despite declines in earnings or even losses, which had led to a surge in the dividend payout ratio as the denominator, aggregate net income, decreased dramatically during the crisis.
Figure 1.16. Dividends of non-financial listed companies
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Note: Dividend payout ratio is measured as dividends divided by net income before extraordinary items.
Source: OECD Capital Market Series dataset, Thomson Reuters Datastream, see Annex for details.
Corporate debt exists in different forms, consisting of a variety of loans and securities with different cash flow claims and provisions. Due to the different properties of debt instruments, many companies have significantly adjusted their composition of debt without substantial change to their debt levels (Rauh, 2010[8]). Thus, it is important to recognise the debt heterogeneity in the capital structure. Bank lending is the dominant type of credit used by non-financial corporations in most Asian economies. While there are notable exceptions (see Section 1.3), the use of corporate bonds and other debt securities is generally not widespread and has not grown markedly relative to bank financing in recent decades in a number of significant Asian jurisdictions, as shown in Panel A of Figure 1.17. In 2020, the average share of debt securities in financial debt for the four jurisdictions presented in Panel B was 22%. In Korea, the share decreased between 2008 and 2020, whereas it grew marginally in Japan. In India, the use of debt securities grew quite substantially, almost doubling over the period.
These shares are low compared to the United States, where the use of debt securities by non‑financial companies is very common, representing 65% of their total financial debt (OECD, 2021[2]). Korea and India are in line with the levels seen in the United Kingdom, where the share was 28% in Q3‑2020 (ONS, 2021[9]). Japan is closer to the low levels seen in the Euro Area, where the share was 13% in 2020 (ECB, 2021[10]).
Figure 1.17. Bank lending versus debt securities in selected Asian economies
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Note: In Panel A, India has been excluded because the available time series starts in 2010. In Panel B, Indian values are from 2019 and 2010, respectively.
Source: Bank of Japan, Bank of Korea, Reserve Bank of India.
Corporate bonds can be an important source of financing for non‑financial companies, offering a way to diversify and lengthen the maturity of their borrowing. This is of particular importance in times of crisis, when the availability of bank credit tends to contract. Both in the aftermath of the 2008 financial crisis and during the pandemic-induced crisis of 2020, companies issued significant amounts of debt through corporate bonds in order to meet immediate obligations to stakeholders or to roll over existing debt. An under‑developed corporate bond market can result in a lack of balance sheet diversification among companies and an over‑dependence on bank lending, which may have broader economic and financial stability implications when credit conditions tighten.
Figure 1.18 offers a closer look at how non-financial companies finance themselves in a number of Asian economies. As is clear from the capitalisation ratio, measured by equity over total assets, shown in Panel A, equity is the single most important source of financing in Japan where non‑financial corporations finance their activities with more than 50% of equity. However, the equity levels stand below 50% of total assets in Korea and India. Lower levels of equity in the balance sheet conversely imply a higher share of liabilities. For example, in Korea and India the aggregate share of liabilities on the balance sheet is 52% and 60% respectively. Looking at the composition of total liabilities as presented by Panel B of Figure 1.18, loans, which include loans from non‑financial institutions, is the largest component in the liability structure of the non-financial corporate sector. On the contrary, in all jurisdictions, debt securities make up the smallest component of aggregate liabilities. Only Korean companies show relatively widespread use of debt securities in their capital structure.
Figure 1.18. Capital structure of non-financial companies in selected economies as of end‑2020
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Note: The values in the figure represent aggregate numbers. Indian values are for 2018.
Source: Bank of Japan, Bank of Korea, Reserve Bank of India.
Importantly, the non-performing loans (NPL) ratio in the region more broadly has been stable and relatively low in the past decade, with no notable increase after the 2008 financial crisis (Figure 1.19). This trend holds for both advanced and emerging Asian economies. This is in sharp contrast to the European Union, which is also heavily bank-dependent, where the share of NPLs rose sharply after the financial crisis and remained elevated during the subsequent euro crisis with significant negative impact on economic performance and financial stability.
Figure 1.19. Non-performing loans ratio in selected regions
![](/adobe/dynamicmedia/deliver/dm-aid--99e440a8-95e7-45b8-9982-89a834347121/image22.png?quality=80&preferwebp=true)
Note: Simple averages. United States data are annual averages based on quarterly figures.
Source: IMF Financial Soundness Indicators, Bank of Japan, Federal Reserve Bank of St. Louis FRED.
However, the aggregate figures conceal significant differences across jurisdictions. As Figure 1.20 shows, the NPL ratio varies widely, from 9.2% in Pakistan to 0.3% in Korea. There are also substantial differences in how the ratio has developed over time. In six out of 15 jurisdictions, the NPL ratio decreased between 2011 and 2020, by an average of 42% (1.9 percentage points). In the remaining nine jurisdictions, it increased by an average of 53% (1.3 percentage points). Three out of six jurisdictions that decreased their ratio between 2011 and 2020 already had a ratio below the median in 2011.
Figure 1.20. Non-performing loans ratio by jurisdiction
![](/adobe/dynamicmedia/deliver/dm-aid--ce8a1d02-e303-4cad-89a0-5423ef67967d/image23.png?quality=80&preferwebp=true)
Note: Most recent values for Korea, Singapore and Viet Nam are from 2019.
Source: IMF Financial Soundness Indicators, Bank of Japan.
Substantial levels of NPLs is a symptom of inefficient allocation of capital, as funding is locked into firms that are unable to generate enough profits to repay their debts. Aside from having detrimental effects on the resilience of the banking system, this may act as a constraint to credit access even for viable and productive firms. Such a development is closely associated with the growing phenomenon of “zombie firms”, mature companies that are continuously unable to meet their interest payments (OECD, 2021[2]). In order to enable credit to flow to productive firms rather than stay sunk in unproductive ones, it is important that national insolvency systems facilitate procedures to allow fundamentally non-viable firms to exit the market while restructuring the debts of fundamentally viable ones. Failure to do so may lead to extended periods of underinvestment and sluggish economic growth.
1.2. Trends in the use of public equity
Equity capital is by nature a long-term and risk-sharing source of financing for corporations. It gives companies the opportunity to invest in projects with uncertain outcomes such as research, development and innovation that contribute to business dynamism, productivity and economic growth. Moreover, already‑listed companies can also continue benefitting from public equity markets by raising additional capital. In this respect, public equity markets are well-suited to increase the resilience of the corporate sector by providing a cushion to companies that need to overcome temporary downturns and at the same time meet their obligations to employees, creditors and suppliers. For instance, in 2009, non‑financial listed companies raised a historical record amount of USD 535 billion of new equity through the stock market at a time when bank financing contracted significantly. This pattern repeated itself in 2020 and 2021, when already non-financial listed companies raised a record total of USD 656 billion and USD 645 billion via secondary public offerings, respectively.
The scrutiny of equity markets serves a critical role in efficiently allocating capital to long-term viable businesses rather than companies that have structural weaknesses and limited prospects to survive. Importantly, from the perspective of ordinary households, public equity markets provide them an opportunity to directly or indirectly participate in the corporate value creation and offer additional options for managing savings and retirement plans. With over 40 000 listed companies worldwide totalling a combined market value of about USD 105 trillion, public equity markets remains the largest asset class available to the general public.
1.2.1. Initial public offerings (IPOs) trends
One important development since the mid‑1990s is the increased use of public equity markets by Asian companies. Between 2009 and 2021, 46% of all public equity in the world was raised by Asian companies. This is a marked increase from 22% during the 1990s. The growth of Asian markets is mainly the result of a surge in Chinese IPOs. The number of Chinese IPOs more than quadrupled between the 1990s and the post‑2008 period, when they represented almost one‑third of global proceeds. The Japanese market, which during the 2000‑08 period experienced a decline in total IPO proceeds compared to the 1990s, saw a 44% increase during the 2009‑21 period, which also contributed to the increased importance of Asian equity markets. While seeing fewer IPOs than China and Japan since 2000, the Indian market has also experienced a gradual increase in the amount of capital raised through IPOs since 1990. In Korea, funds raised have increased slightly over the three periods presented below in Figure 1.21, and Thailand saw a significant increase over the last period compared to the 2000‑08 period, mainly driven by the proceeds raised in 2020 and 2021. As a result of the surge in Asian IPOs, the global share of Asian listed companies has also increased. At the beginning of 2021 over half of the world’s listed companies were listed on Asian stock exchanges, together representing one‑third of the market value of listed companies globally.
Figure 1.21. Initial public offerings, total amount raised
![](/adobe/dynamicmedia/deliver/dm-aid--496321fe-5112-4943-92d6-d839db670e7b/image24.png?quality=80&preferwebp=true)
Source: OECD Capital Market Series dataset, see Annex for details.
The shift towards Asia has been even more pronounced with respect to the number of IPOs by non‑financial companies. As seen in Figure 1.22, Chinese non-financial companies have been the world’s most frequent users of IPOs during the past decade, with twice as many IPOs as in the United States. Moreover, other Asian markets – Hong Kong (China), India, Japan and Korea – also rank among the top ten IPO markets globally. Importantly, several Asian emerging markets, such as Indonesia, Malaysia and Thailand, rank higher in terms of IPOs than most advanced economies. Ten out of the 20 top IPO markets globally between 2012 and 2021 were in Asia.
Figure 1.22. Top 20 jurisdictions by number of non-financial company IPOs between 2012 and 2021
![](/adobe/dynamicmedia/deliver/dm-aid--0b8b3886-0303-4e2a-b22d-7e194643be41/image25.png?quality=80&preferwebp=true)
Source: OECD Capital Market Series dataset, see Annex for details.
The change in the global public equity market landscape has not only been driven by a shift in the number of new listings towards Asian markets. Another contributing factor is the increasing number of companies that have delisted from the stock markets. Since 2005, over 33 000 companies have delisted from public stock markets globally (Figure 1.23). Specifically, there were 8 400 delistings of European companies over the 2005‑21 period, and 6 000 delistings of US companies. Similarly, in Asia, 6 700 companies delisted, of which around 1 400 were Japanese. In the United States, these delistings were larger than the number of new listings, resulting in a net decrease in the number of listed companies every single year between 2005 and 2020. Notably, in 2021, the trend was reversed with more than 300 new listings against 200 delistings. In Europe, the number of delistings surpassed the new listings every year since 2008. However, in Asia, net listings were positive in every year between 2005 and 2021. In Japan, net listings were positive in 11 out of the 17 years shown. In China, there were on average 36 delistings per year against an average of almost 270 new listings, resulting in a considerable net increase in the total number of listed companies. In Korea, net listings were negative only in 2009, 2010 and 2012.
The growth of Asian stock markets and the growing number of delistings in advanced economies, mostly in the United States and Europe, are not the only important developments inthe global equity markets during the past decade. Another key development is the decline in the listings in some advanced markets of smaller growth companies, defined as those raising less than USD 100 million in an IPO. In the United States, for example, the share of growth company listings in all listings was 45% during the 2009‑21 period compared to 77% during the 1995‑99 period. The United Kingdom has seen a similar trend, with an average of 73% of growth company listings during 2009‑21 against 84% in the first period. However, all advanced Asian markets have all seen an increase in the share of growth company listings in all listings in 2009‑21 compared to the 1990s. In these markets, nine out of ten IPOs in the past decade were conducted by growth companies. Notably, Asia has hosted more than 60% of the world’s growth company IPOs in the past five years, of which China and India together represented half.
Figure 1.23. Newly listed and delisted companies
![](/adobe/dynamicmedia/deliver/dm-aid--1f020ca7-eb5a-4105-9478-4ffea47caaee/image26.png?quality=80&preferwebp=true)
Source: OECD-ORBIS Corporate Finance dataset, OECD Capital Market Series dataset, see Annex for details.
Figure 1.24. Growth company IPOs’ share in the total number of non-financial company IPOs
![](/adobe/dynamicmedia/deliver/dm-aid--2e1bde66-3c61-41a8-87f8-4413710d493f/image27.png?quality=80&preferwebp=true)
Source: OECD Capital Market Series dataset, see Annex for details.
As the largest users of public equity markets, Asian companies have also become important issuers in non-domestic markets. At the end of 2020, 526 Asian companies were listed on a market different from the one where they were domiciled2 (Figure 1.25 Panel A). While these companies only accounted for 2% of the total number of listed companies in Asia, they represented one‑third of the total non-domestic listed companies globally. In terms of market capitalisation, Asian non-domestic listed companies represent 5.6% of the market capitalisation of the companies domiciled in Asia, slightly over the 5% global share of non‑domestic listed companies. Chinese companies represent 90% of the market capitalisation of Asian companies listed on a non-domestic stock exchange. Globally, the United States hosts most of these non‑domestic listings with 610 companies, followed by the United Kingdom with 257 companies (Figure 1.25 Panel B). The United States also hosted the highest number of non-domestic listings of Asian companies. In fact, five jurisdictions hosted almost 90% of the non-domestic listings of Asian companies, namely the United States, Hong Kong (China), Singapore, Australia and the United Kingdom (Panel C).
Figure 1.25. Non-domestic listed companies and host stock exchanges’ jurisdiction as of end‑2020
![](/adobe/dynamicmedia/deliver/dm-aid--7165f2f6-48a7-434c-944f-ad8983692fb3/image28.png?quality=80&preferwebp=true)
Note: In Panel A, China includes both mainland China and Hong Kong (China).
Source: OECD Capital Market Series dataset, see Annex for details.
A breakdown of the total proceeds from IPOs across different industries between 2012 and 2021 shows that companies in the financial, technology and industrials sectors have absorbed a significant part of both global and Asian IPO proceeds. There are some noteworthy differences in Japan and India compared to the other Asian jurisdictions shown in Figure 1.26. Industrial companies dominate the Japanese IPO market with 29% of all proceeds, while financials correspond to 38% of all proceeds in India.
Figure 1.26. Distribution of IPO proceeds by industry (share in total proceeds, 2012‑21)
![](/adobe/dynamicmedia/deliver/dm-aid--1c2590ec-44c9-46b1-8d70-87e88248895c/image29.png?quality=80&preferwebp=true)
Source: OECD Capital Market Series dataset, see Annex for details.
The healthcare, technology and telecommunications industries (HTT) have a cumulative share of 33% of all global and Asian proceeds. Technology companies are dominant within the HTT industries in most of the Asian jurisdictions provided in Figure 1.26, while the Japanese HTT industries are dominated by the telecommunications industry. Out of the total IPO proceeds that went to the HTT industries in China and Korea, technology accounted for 23% of the total amount raised in both jurisdictions. India differs significantly in terms of the share of HTT industries among the Asian jurisdictions shown in the figure. In India, the share of HTT industries represents only 22%, with technology accounting for no more than 4% of total IPO proceeds.
1.2.2. Secondary public offerings (IPOs) trends
Secondary public offerings (SPOs) allow companies that are already‑listed to continue raising equity capital on primary markets after their IPO. The proceeds from an SPO may be used for a variety of purposes and can also help fundamentally sound companies bridge a temporary downturn, such as the crisis caused by the COVID‑19 pandemic. As mentioned in the introduction to this section, SPOs played an important role in providing the corporate sector with equity capital both in the wake of the 2008 financial crisis and in 2020‑21.
The use of SPOs as a source of funding has increased in recent decades. The total proceeds raised through SPOs globally between 2009 and 2021 amounted to almost USD 9 trillion, which is 3.6 times the amount raised during the 1990s (Figure 1.27). The global SPO market is also dominated by Asian companies. Between 2009 and 2021, 36% of all proceeds raised through SPOs worldwide were raised by Asian companies. Importantly, the proceeds by Asian companies increased more than eight times between 1990‑99 and 2009‑21. China represents a significant part of this development. The use of SPOs by Chinese companies was marginal during the 1990s, but since 2009 they have raised USD 1.6 trillion in equity through SPOs, equal to 18% of the global amount over the same period. In Japan, the capital raised via SPOs more than doubled between 1990‑99 and 2009‑21. Indian, Korean and Thai companies also raised more capital via SPOs in 2009‑21 than in the 1990s. In particular, Indian financial companies raised USD 164 billion via SPOs during the 2009‑21 period, equivalent to almost one‑fifth all capital raised via financial SPOs in Asia.
Figure 1.27. Secondary public offerings, total amount raised
![](/adobe/dynamicmedia/deliver/dm-aid--d5593220-c969-41dc-9dc9-dd9f7ef9c9ad/image30.png?quality=80&preferwebp=true)
Source: OECD Capital Market Series dataset, see Annex for details.
A breakdown of the total proceeds from SPOs across industries between 2012 and 2021 shows that financials and industrials companies, after raising a significant share of capital in IPOs, continued raising capital via SPOs (Figure 1.28). While companies from the healthcare, technology and telecommunications industries (HTT) also raised considerable amounts of capital via SPOs, their share in total SPOs proceeds was lower than in IPOs proceeds. The HTT industries’ share of proceeds for Asia as a whole is 22%, roughly the same as the global figure. Among the Asian jurisdictions presented in the figure, Japan has the highest share of proceeds by HTT industries with 27%, followed by China with 25%. As with IPOs, financial company proceeds accounted for a significant share (53%) of the total Indian SPO proceeds. On the other hand, the HTT industries’ share of proceeds was only 14% in India.
Figure 1.28. Distribution of SPO proceeds by industry (share in total proceeds, 2012‑21)
![](/adobe/dynamicmedia/deliver/dm-aid--e0147824-33ab-4cb7-86dc-d9430a708ace/image31.png?quality=80&preferwebp=true)
Source: OECD Capital Market Series dataset, see Annex for details.
1.3. Trends in the use of corporate bonds
Corporate bonds have become an increasingly important source of financing for non-financial companies in recent years (Çelik, Demirtaş and Isaksson, 2015[11]). They offer companies a way to diversify their funding and to access long-term financing, as seen in the significant increase in the proportion of corporate bonds with longer maturities in recent years (Badoer, 2016[12]). Since the 2008 financial crisis, there has been a considerable shift from bank loans to bonds (Becker and Ivashina, 2014[13]). Indeed, global bond issuance amounts doubled from an annual average of USD 932 billion before the crisis (between 2000‑07) to an annual average of USD 2 trillion in the period between 2008 and 2021. Following the outbreak of the COVID‑19 crisis, corporate bonds have represented a significant source of capital for the non‑financial corporate sector. In 2020 and 2021, global bond issuances by non-financial companies reached a historical peak of USD 3 trillion and USD 2.5 trillion, respectively, resulting in an all‑time high of USD 15.3 trillion in outstanding non‑financial corporate bonds at the end of 2021.
Asian corporate bond markets have undergone a complete transformation in the past two decades. Aggregate issuance has grown from a relatively low level of USD 129 billion annually between 2000 and 2008 to USD 602 billion between 2009 and 2021, reaching USD 965 billion in 2021 (Figure 1.29 Panel A). The engine of this growth has been the Chinese corporate bond market. China has gone from representing a negligible part of the region’s total issuance to more than two‑thirds in 2021. While issuances by Japanese companies almost doubled from 2000 to 2021 in absolute terms, the relative share of Japanese issuances decreased significantly, from 56% in 2000 to 13% in 2021 (Figure 1.29 Panel B).
The total amount of outstanding non-financial corporate bonds issued by Asian companies reached USD 3.8 trillion in 2021 (Figure 1.29 Panel C). This represents 25% of global outstanding amounts, and issuance represents 39% of the global total (Figure 1.29 Panel D). China alone accounts for 27% of global issuance and 15% of global outstanding amounts.
Figure 1.29. Asian non-financial corporate bonds landscape
![](/adobe/dynamicmedia/deliver/dm-aid--cc9ea04f-474c-4c2f-846e-0e517cb3ced2/image32.png?quality=80&preferwebp=true)
Source: OECD Capital Market Series dataset, Thomson Reuters Eikon, see Annex for details.
As bond markets have grown, the average credit quality of corporate bonds has decreased from the high levels of the early 2000s. The value‑weighted average rating of Asian issues has decreased from above A (16.4 on a numerically codified scale where 21 represents the highest rating, AAA) in 2000 to slightly below BBB+ (13.8) in 2021, i.e. about two notches above the lowest investment grade rating (Figure 1.30 Panel A). This is somewhat higher than the average rating globally, towards which Asian issuers have converged since about 2015 after historically having had a higher average rating. However, this development has not been driven by a marked increase in non-investment grade issuance. The non‑investment grade (or “high‑yield”) bond market has remained at very low levels throughout the analysed period, representing 3.7% of total issuance in the region in 2020, although growing to 6.0% in 2021. This is compared to a significantly higher share of 22.5% globally (Figure 1.30 Panel B). The Japanese non‑investment grade market is small (although the share of non-investment grade issuance has varied sharply between years over the period analysed). The non‑investment grade share of issuance in China was 4.5% in 2020 and 3.1% in 2021. It follows that the reduction in average ratings observed in Panel A is driven primarily by a change in composition within the investment grade category from higher ratings towards lower investment grade ratings. In addition, the change in regional composition of issuance shown in Panel B of Figure 1.29 also affects the Asian rating index.
Figure 1.30. Credit quality of non-financial corporate bonds
![](/adobe/dynamicmedia/deliver/dm-aid--0435cce9-685f-4d15-9cab-4de920560389/image33.png?quality=80&preferwebp=true)
Source: OECD Capital Market Series dataset, Thomson Reuters Eikon, see Annex for details.
Indeed, the composition of investment grade issuance has moved towards lower ratings in recent years, globally as well as in Asia. As shown in Figure 1.31, at the end of 2020, bonds in the BBB category – the lowest investment grade category – represented the largest share of investment grade issuance in both Asia (50.2%) and globally (51.3%). The increase (and corresponding decrease in the A grade categories) has been particularly pronounced in Asia, where the share of BBB rated bonds increased from 5.9% in 2009 to more than half in 2020. However, in 2021 the share in Asia dropped to 36.8%, making A grades the largest category at 45.8%. Meanwhile, the share of BBB rated bonds in investment grade issuance globally grew to 57.5%.
Figure 1.31. Composition of investment grade issuance
![](/adobe/dynamicmedia/deliver/dm-aid--c79f41a1-97d1-4ff6-86a9-ac20b8b41757/image34.png?quality=80&preferwebp=true)
Source: OECD Capital Market Series dataset, Thomson Reuters Eikon, see Annex for details.
As Asian bond markets have grown, the industry composition of issuance has also changed (Figure 1.32). Most notably, industrial companies’ issuance has more than doubled, increasing from 23% in 2008 to 52% in 2021. The largest corresponding decreases have taken place in the utilities (from 27% in 2008 to 13% in 2021) and telecommunication industries (8% to 4%). The smallest industry in terms of bond issuance in Asia is healthcare, which represented 2% of total issuance at the end of 2020 (although increasing from 1% in 2008). In 2021 the share fell again, to below 1%.
Figure 1.32. Industry distribution of non-financial corporate bonds issued in Asia
![](/adobe/dynamicmedia/deliver/dm-aid--b1f789c5-33f4-46d5-82be-0ab7452cd546/image35.png?quality=80&preferwebp=true)
Source: OECD Capital Market Series dataset, Thomson Reuters Eikon, see Annex for details.
Figure 1.33 shows the distribution of the number of corporate bonds issued across five different size categories over the past two decades, along with the median issue size. Globally, up until 2012 the trend was an increase in the median issue size and a shrinking share of the number of bond issuances taking place in the two smallest categories (below USD 100 million), which are the most attainable for smaller growth companies looking to access bond markets. However, since 2012 the median issue size globally has decreased from USD 307 million to USD 128 million in 2021. Simultaneously, the share of bonds below USD 100 million (i.e. the two smallest brackets) more than doubled from 18% to 43% of the total number of bonds issued (Panel A). Broadly, the trend has been similar in advanced Asia. During the same period, median issue size decreased from USD 203 million in 2012 to USD 51 million in 2021, while the two smallest size categories increased significantly, from 15% of the total number of issues to 71% (Panel B). However, the opposite is true for emerging and developing Asia (excluding China). The median issue size has remained roughly similar (USD 71 million to USD 69 million), and the share of the two smallest categories has decreased modestly, from 59% to 57%. However, the corresponding increase has primarily taken place in the fourth size group, between USD 250‑500 million, rather than the largest size bracket (>=USD 500 million) (Panel C).
Panels D-F show the developments in individual countries. In Japan, developments are similar to the global trend. In particular, the share of the total number of issues by the second group (USD 50‑100 million) has increased significantly, from 5% in 2008 to 38% in 2021 (Panel D). Korea has seen a similar trend, although with concentration in the smallest group (< USD 50 million), which represented 66% of the total number of issuances in 2021 (Panel E). Finally, in China the median issue size and distribution between brackets have been relatively stable since 2013. Prior to that, the market was dominated by larger issuances, with the median issue size reaching USD 557 million in 2012 and issues larger than USD 500 million representing 54% of the total number of issues. In 2021, the median issue size was USD 150 million, similar to the global median, and the number of issuances within the smallest two size groups represented 39% of the total, also close to the global figure (Panel F).
Figure 1.33. Median issue size and distribution by size category
![](/adobe/dynamicmedia/deliver/dm-aid--93799b7a-9a32-4b53-b7ad-ee45694036c4/image36.png?quality=80&preferwebp=true)
Note: Panel F starts from 2009 since bond issuance by Chinese companies was limited prior to that year.
Source: OECD Capital Market Series dataset, Thomson Reuters Eikon, see Annex for details.
The lion’s share of corporate bonds in Asia are listed either on a local exchange (i.e. in the same jurisdiction as where the company is domiciled), issued over the counter (OTC) or not listed. In advanced Asia, and emerging and developing Asia these three categories together make up 91% and 89%, respectively, of the total amount issued over the past two decades. In advanced Asia, OTC trading is the most common category, representing 61% of total issuance. Japan, in particular, has a significant share of OTC trading, which accounted for 85% of total issuance from 2000 to 2021. The corresponding figure in emerging and developing Asia is lower at 20%. Instead, listing on local exchanges is more common within this category, representing 44% of total issuance compared to 16% in advanced Asia (Figure 1.34 Panel A).
With respect to currency composition, the Japanese Yen and Korean Won dominate issues in advanced Asia, representing 49% and 26% of total issuance, respectively. Unsurprisingly, issuance in emerging and developing Asia is done primarily in Chinese Yuan, which accounts for 82% of total issuance. The US dollar (USD) is an important foreign currency in all regions, representing 13% of all issuance in advanced Asia and 9% in emerging and developing Asia. Looking at the individual jurisdictions, the US dollar is most widely used in Korea, where it accounts for 12% of issuance, followed by China and Japan with 7% and 6%, respectively (Figure 1.34 Panel B). In addition to the US dollar, other important currencies in advanced Asia are the domestic currencies from Chinese Taipei and Singapore, and the Euro. In emerging and developing Asia, the Thai Baht and Indian Rupee make up the largest part of the “other” category in Panel B.
Figure 1.34. Distribution of corporate bond issuances by exchange and currency, 2000‑21
![](/adobe/dynamicmedia/deliver/dm-aid--72b99e49-ccf0-4993-9f25-18c070448ea3/image37.png?quality=80&preferwebp=true)
Note: In Panel A, any OTC issuance is classified as OTC, even if the issue is registered as local OTC.
Source: OECD Capital Market Series dataset, Thomson Reuters Eikon, see Annex for details.
1.4. Trends in ASEAN capital markets
Companies from Southeast Asia raised a total of USD 265 billion and USD 528 billion between 1990 and 2021 through IPOs and SPOs, respectively. During the entire period, proceeds of ASEAN IPOs and SPOs accounted for 11% each of Asian IPOs and SPOs. The share of ASEAN IPOs and SPOs was 18.3% and 28.8% in total Asian IPOs over the 1990‑99 period, which decreased to 8.7% and 9.9% during the 2009‑21 period (Figure 1.35 Panels A and C). Non‑financial companies made up 86% and 71% of the total IPO and SPO proceeds over the entire period from 1990 to 2021, respectively. For both, the industrials sector represents a significant part (Figure 1.35 Panels B and D).
Companies from ASEAN countries raised a total of USD 1.5 trillion through corporate bonds over the period from 1990 to 2021. The share of companies from financial industry was significantly higher than for IPOs and SPOs, at 55% of total corporate bond proceeds over the same period. Over the entire period from 1990 to 2021, ASEAN corporate bonds accounted for 6.9% of total Asian corporate bond proceeds. The share of ASEAN corporate bonds was 9.5% of total corporate bond proceeds of Asia over the 1990‑99 period (Figure 1.36 Panel A), however, the share decreased to 6.1% during the 2009‑21 period. Companies in the industrials, energy and utilities sectors made up a significant part of corporate bonds over the entire period (Figure 1.36 Panel B).
Figure 1.35. Initial and secondary public offerings by ASEAN companies
![](/adobe/dynamicmedia/deliver/dm-aid--f018928e-d2bc-4915-b244-bfa3a224bdf5/image38.png?quality=80&preferwebp=true)
Source: OECD Capital Market Series dataset, see Annex for details.
Figure 1.36. Corporate bond issuances by ASEAN companies
![](/adobe/dynamicmedia/deliver/dm-aid--5ff68cb0-f1f8-435e-b7aa-440819b2440c/image39.png?quality=80&preferwebp=true)
Source: OECD Capital Market Series dataset, Thomson Reuters Eikon, see Annex for details.
1.5. Ownership structure of listed companies
Asian companies significantly influence today’s corporate ownership landscape. The increasing participation of Asian companies in public equity markets has shifted the importance of certain investors and affected the ownership concentration at the company level on a global scale. Between 2009 and 2020, 47% of all public equity in the world was raised by Asian companies. This is a marked increase from 22% during the 1990s. The dynamism of Asian equity markets has turned the region into the largest equity market by number of listed companies, hosting 54% of the total number of companies globally and representing one‑third of the global market capitalisation by the end of 2020 (Figure 1.37). Advanced Asian equity markets account for 30% of the global number of listed companies and emerging and developing Asian equity markets account for 24%. ASEAN markets, despite not representing a large share of the global market capitalisation, host 8% of the total number of listed companies globally.
Figure 1.37. Asia’s share in global equity markets as of end‑2020
![](/adobe/dynamicmedia/deliver/dm-aid--196c995a-b09b-497d-b5f7-a0904be49b9d/image40.png?quality=80&preferwebp=true)
Source: OECD Capital Market Series dataset, FactSet, Thomson Reuters, Bloomberg, see Annex for details.
At the end of 2020, there were 40 531 listed companies in the world with a combined market value of USD 105 trillion. This section uses ownership information from almost 26 000 listed companies from 92 different markets. Together, these companies make up 98% of total global stock market value. Using the records of owners for each company, the investors were classified into five categories: private corporations, public sector, strategic individuals, institutional investors and other free float (De La Cruz, Medina and Tang, 2019[14]) (see Annex for details).
At the global level, the largest investor category is institutional investors, who own almost 43% of the world market capitalisation, followed by private corporations with 11%, the public sector with 10%, and strategic individuals with 9% (Figure 1.38). The remaining 27% free‑float is held by shareholders that do not reach the threshold for mandatory disclosure of their ownership records and retail investors that are not required to do so. Contrary to the global picture, institutional investors are not the most prominent investor category in Asia, where they own only 18% of the listed equity. Instead, corporations, the public sector and strategic individuals are key investors in Asian equity markets owning 20%, 17% and 14% of the listed equity, respectively. The presence of corporations and institutional investors as owners of listed companies is much higher in companies listed in developed Asia compared to those listed on developing and emerging Asian markets. Conversely, emerging and developing Asia shows a higher ownership of the public sector and strategic individuals in listed companies. Notably, companies listed on ASEAN stock exchanges have the highest share of corporations as owners at 32%.
Figure 1.38. Investors’ holdings as of end‑2020
![](/adobe/dynamicmedia/deliver/dm-aid--95943bcc-ef61-459f-a29b-f2ff6d11d31c/image41.png?quality=80&preferwebp=true)
Source: OECD Capital Market Series dataset, FactSet, Thomson Reuters, Bloomberg, see Annex for details.
There are significant differences between jurisdictions with respect to the relative importance of each category of investors (Figure 1.39). Corporations are important investors in Sri Lanka, the Philippines, Pakistan, Indonesia and India, where they own over one‑third of the listed equity. The public sector is an important owner in Malaysia, China and Viet Nam, owning over 25% of the listed equity. Strategic individuals hold a significant share of the listed equity in Hong Kong (China), Thailand, China, Bangladesh and the Philippines. Institutional investors are important owners of listed equity in Japan, Chinese Taipei and India where they hold over 20% of the listed equity. In Hong Kong (China) and Korea their equity holdings account for 18% of the market capitalisation. The presence of institutional investors remains modest in mainland China, but with the progressive inclusion of A‑shares in investable indices it is expected to grow.
Figure 1.39. Investors’ holdings in Asian markets as of end‑2020
![](/adobe/dynamicmedia/deliver/dm-aid--7284f623-8c66-4178-bd91-74efd37ab58a/image42.png?quality=80&preferwebp=true)
Source: OECD Capital Market Series dataset, FactSet, Thomson Reuters, Bloomberg, see Annex for details.
There are also significant differences across markets with respect to non-domestic ownership (Figure 1.40). For example, in Singapore, Pakistan, Sri Lanka, Chinese Taipei and Indonesia, around 30% of listed equity belongs to non‑domestic investors. However, different categories of investors are responsible for non‑domestic ownership. In Singapore, Pakistan, Sri Lanka and Indonesia over half of the non-domestic ownership is made up by corporations whereas in Chinese Taipei 85% of it is in the hands of institutional investors. Hong Kong (China) has the highest level of non-domestic investment, with mainland Chinese investors holding over 50% of it. In terms of categories, corporations hold 34% and institutional investors 27% of non-domestic holdings in companies listed in Hong Kong (China).
Figure 1.40. Non-domestic ownership in Asian markets by category of investor as of end‑2020
![](/adobe/dynamicmedia/deliver/dm-aid--d4f2d6ef-e687-47c4-a56d-271c0278d3ee/image43.png?quality=80&preferwebp=true)
Source: OECD Capital Market Series dataset, FactSet, Thomson Reuters, Bloomberg, see Annex for details.
Non-domestic ownership in many markets is also driven by the presence of global institutional investors. The markets in the region with the highest presence of non-domestic institutional investors are Chinese Taipei, Japan, Hong Kong (China), Korea and India where they hold over 13% of the listed equity. The growing use of indices by institutional investors along with the growing share of corporate equity they own, has led to important differences with respect to institutional ownership between markets and companies that are included in a major index and those that are not. Japan, for example, is the second largest country by weighting in the MSCI World Index (around 7% of the index), after the US market. The markets that are included in large investable indices with higher weights show a significantly higher share of institutional investment, as is the case for Japan, China, Korea, Chinese Taipei and India.
1.5.1. Ownership concentration
The degree of ownership concentration in an individual company is not only important to the relationship between owners and managers. It may also require focus on the relationship between controlling owners and non-controlling owners. The ownership structure in most markets today is characterised by a fairly high degree of concentration at the company level. Asian listed companies, in particular in emerging and developing Asia, have contributed to this increase. Since Asian companies typically have a controlling shareholder, either a corporation, family or the state, shifts towards Asian emerging markets globally have increased the dominance of companies with controlling owners.
Ownership concentration in listed companies is higher in Asia than globally and in advanced markets outside the region. Figure 1.41 shows the share of companies with different levels of ownership for the three largest shareholders at the company level. In 28% of the world’s listed companies, the three largest shareholders together hold between 10% and 29% of the equity. In 29% of the listed companies, the three largest shareholders hold between 30‑49%, and in 42% of them, the largest three shareholders hold more than 50% of the equity. The three largest shareholders own a total of less than 10% in only 0.6% of the world’s listed companies. Importantly, in Asia the three largest shareholders own over 50% of the equity in almost half of the listed companies in the region. Concentration patterns also differ between companies listed in advanced Asian markets and those listed in emerging and developing Asian markets, where the share of companies with the highest level of ownership concentration (i.e. over 50%) is almost 60%. Importantly, ASEAN markets show the highest levels of ownership concentration as the three largest shareholders own over 50% of the equity in almost 70% of listed companies.
Figure 1.41. Ownership concentration by the largest three shareholders as of end‑2020
![](/adobe/dynamicmedia/deliver/dm-aid--b363a5bb-8662-453c-a3f4-519984c17ffd/image44.png?quality=80&preferwebp=true)
Note: The figure shows the number of companies with different levels of ownership by the three largest shareholders as a share of the total number of listed companies in each region.
Source: OECD Capital Market Series dataset, FactSet, Thomson Reuters, Bloomberg, see Annex for details.
The regional picture masks some important differences at the economy level. Figure 1.42 shows the ownership concentration at the company level for each market. It shows the average combined holdings of the largest single, largest 3 and largest 20 owners. For example, in Indonesia the average combined holdings of a company’s three largest owners add up to over 55% of the equity capital. Ownership in listed companies is also concentrated in Singapore, Hong Kong (China), the Philippines and Sri Lanka where the largest three shareholders on average own over 45% of the equity in each listed company. Other economies in the region show a significantly lower level of concentration, notably Korea, Japan and Chinese Taipei. In general, the level of concentration of ownership in the region is similar to levels in Latin America and in some other emerging markets.
Figure 1.42. Ownership concentration at the company level as of end‑2020
![](/adobe/dynamicmedia/deliver/dm-aid--9539dd93-b5ce-45b9-8d7b-a39e6d344156/image45.png?quality=80&preferwebp=true)
Source: OECD Capital Market Series dataset, FactSet, Thomson Reuters, Bloomberg, see Annex for details.
1.5.2. Corporations as owners
As previously shown in Figure 1.38, corporations are significant owners of equity in the region. Indeed, they hold 20% of the regional market capitalisation and in eight out of the 15 jurisdictions for which ownership information is available, corporations hold over 30% of the listed equity. In several of these jurisdictions non-domestic entities are responsible for corporate ownership (Table 1.2). For example, in Sri Lanka, Pakistan and Singapore, over 20% of the market capitalisation is owned by non-domestic corporations. In Asia in general, it is also common that listed corporations are owned by other listed companies. The second to last column in the table below shows the share of the market capitalisation owned by another public corporation. Jurisdictions with high overall corporate ownership have high ownership by other listed companies. This is the case in Sri Lanka, the Philippines, Pakistan and Indonesia where almost a quarter of the listed equity in each market is held by other listed corporations. However, in many of these cases, this ownership is made up by non‑domestic listed companies. This is the case notably in Singapore, Sri Lanka, Pakistan, Indonesia and Hong Kong (China), where over 10% of the market capitalisation is owned by non-domestic listed corporations.
Table 1.2. Corporations as owners by location and listed status as of end‑2020
Share of market capitalisation owned by: |
|||||
---|---|---|---|---|---|
Corporations |
Non-domestic corporations |
Domestic corporations |
Publicly listed corporations |
Non-domestic public listed corporations |
|
Sri Lanka |
57% |
20% |
37% |
43% |
18% |
Philippines |
47% |
4% |
43% |
30% |
3% |
Pakistan |
44% |
24% |
19% |
25% |
17% |
Indonesia |
43% |
17% |
25% |
24% |
16% |
India |
33% |
9% |
24% |
16% |
7% |
Viet Nam |
31% |
14% |
17% |
18% |
9% |
Bangladesh |
31% |
13% |
18% |
11% |
9% |
Singapore |
30% |
21% |
9% |
24% |
19% |
Malaysia |
25% |
6% |
19% |
10% |
5% |
Thailand |
24% |
8% |
16% |
17% |
7% |
Korea |
23% |
1% |
22% |
21% |
1% |
Japan |
22% |
2% |
20% |
18% |
1% |
Hong Kong (China) |
22% |
19% |
3% |
16% |
14% |
Chinese Taipei |
13% |
2% |
12% |
7% |
0% |
China |
12% |
2% |
9% |
4% |
2% |
Source: OECD Capital Market Series dataset, FactSet, Thomson Reuters, Bloomberg, see Annex for details.
The significant corporate ownership in the region also reflects the existence of intricate company group structures. A sample of the largest 100 listed companies in several Asian jurisdictions provides evidence that these companies have over 60 subsidiaries on average. This is the case in China, Hong Kong (China), Japan, Malaysia and Singapore (OECD, 2022[15]).
Company groups can support economic growth and employment through economies of scale and synergies. If adequately managed, they can foster cross-border investments and operations through multinational companies, and are useful for the safeguarding of intellectual property rights. Reduced need for external finance, lower informational asymmetries, lower transaction costs and less dependence on contract enforcement instruments are other benefits of company groups. Likewise, the incorporation of listed subsidiaries or unlisted joint ventures can stimulate entrepreneurship by better incentivising managers to innovate and have their success recognised by shareholders (OECD, 2020[16]).
However, company groups raise important challenges with respect to corporate governance, including how to protect minority shareholders’ interests against controlling shareholders and how to effectively oversee various risks arising from group structures. OECD (2022[15]) provides a set of good practices for corporate governance of company groups in Asia. These recommendations focus on issues related to risk management, governance policies, access to key information about activities of group companies, independent directors, permissible group structures, disclosure and controlling persons.
1.5.3. The public sector as an owner
The importance of listed companies under public sector ownership has increased worldwide during the past two decades, mostly reflecting the listing of minority stakes of state‑owned enterprises (SOEs) as a first step toward or as an alternative to complete privatisation. The partial privatisation of many state‑owned companies through stock market listings in Asia has contributed to making Asian stock markets more dynamic and attractive. It is notable that in Asia, and in many Asian emerging markets in particular, privatisation through stock market listings has not led to any change in control. Today states have controlling stakes in a large number of listed companies. Globally, the public sector held USD 10.7 trillion of listed equity as of end‑2020, which was almost 10% of global market capitalisation. In Asia this share is 17% of the regional market capitalisation.
Table 1.3 shows the public sector ownership by four different investor types. The first type of public sector investor includes both central and regional governments that hold stakes in publicly listed companies. The second type corresponds to public pension funds, which manage mandatory pension schemes or/and retirement savings of public sector employees. The third type is sovereign wealth funds (SWFs) that serve as central state ownership agencies with controlling or non-controlling stakes in publicly listed companies. They include savings funds, stabilisation funds and pension reserve funds. The fourth type is financial and non-financial SOEs that hold shares in listed corporations. In emerging and developing Asia, central and local governments are the largest public sector investor type, accounting for 73% of all public sector holdings in listed equity, followed by SOEs and SWFs. This picture is different in advanced Asia where SWFs is the largest public sector owner (33%), ahead of public pension funds (31%).
Table 1.3. Public sector holdings as of end‑2020
Public sector holdings (USD million) |
As share of public sector holdings |
||||
---|---|---|---|---|---|
Governments |
Public pension funds |
Sovereign wealth funds |
State‑owned enterprises |
||
Advanced Asia |
660 280 |
24% |
31% |
33% |
12% |
Emerging and developing Asia |
4 607 152 |
73% |
2% |
13% |
12% |
Bangladesh |
2 525 |
75% |
0% |
0% |
25% |
China |
3 984 075 |
76% |
1% |
14% |
9% |
Hong Kong (China) |
30 692 |
99% |
0% |
0% |
1% |
India |
275 936 |
52% |
0% |
0% |
48% |
Indonesia |
75 727 |
92% |
1% |
0% |
7% |
Japan |
134 774 |
56% |
4% |
0% |
40% |
Korea |
252 993 |
8% |
77% |
13% |
3% |
Malaysia |
140 155 |
18% |
41% |
12% |
29% |
Pakistan |
5 247 |
75% |
1% |
0% |
24% |
Philippines |
1 852 |
7% |
90% |
0% |
3% |
Singapore |
170 216 |
0% |
0% |
87% |
12% |
Sri Lanka |
733 |
29% |
49% |
0% |
22% |
Chinese Taipei |
71 604 |
48% |
4% |
48% |
0% |
Thailand |
79 917 |
61% |
8% |
0% |
31% |
Viet Nam |
40 985 |
80% |
0% |
10% |
10% |
Source: OECD Capital Market Series dataset, FactSet, Thomson Reuters, Bloomberg, see Annex for details.
Table 1.4 provides an overview of the magnitude of listed companies controlled by the public sector. Any company in which at least one ultimate parent is a government which owns 25% of the shares is classified as controlled by the state.3 By the end of 2020, 1 677 listed companies globally had the state as a controlling shareholder. Of this number, 1 315 companies were listed on Asian stock exchanges with a total market capitalisation of USD 7.4 trillion. These listed firms under state control are often among the largest listed firms in their jurisdictions, for example representing about 44% of the listed equity in China, 43% in Malaysia and 39% in Viet Nam. The average public sector ownership in these companies in each market is shown in Table 1.4 and corresponds to the ownership of all public sector investors and not necessary to only one government. Notably, the controlled firms have an average public sector ownership over 50% of the listed equity.
Table 1.4. Listed companies in Asia under state control as of end‑2020
Market cap. of state controlled companies (USD million) |
No. of listed companies under state control |
Average state holdings4 |
State‑controlled listed companies (share of total market capitalisation) |
State‑controlled listed companies (share of total number of companies) |
|
---|---|---|---|---|---|
China |
5 434 950 |
773 |
50% |
44% |
26% |
Malaysia |
180 573 |
59 |
57% |
43% |
12% |
Viet Nam |
62 040 |
37 |
52% |
39% |
21% |
Indonesia |
125 977 |
46 |
65% |
26% |
9% |
Singapore |
113 108 |
17 |
47% |
26% |
6% |
Thailand |
121 267 |
18 |
51% |
24% |
5% |
Bangladesh |
8 483 |
11 |
64% |
23% |
11% |
Pakistan |
7 539 |
12 |
67% |
17% |
9% |
Hong Kong (China) |
686 252 |
194 |
53% |
15% |
12% |
India |
285 769 |
101 |
68% |
11% |
9% |
Sri Lanka |
664 |
5 |
49% |
5% |
8% |
Chinese Taipei |
63 864 |
9 |
37% |
4% |
3% |
Japan |
245 175 |
16 |
46% |
4% |
0% |
Korea |
54 178 |
16 |
54% |
3% |
1% |
Philippines |
306 |
1 |
38% |
0% |
1% |
Source: OECD Capital Market Series dataset, FactSet, Thomson Reuters, Bloomberg, see Annex for details.
Notes
← 1. Zombie companies’ definition here follows Adalet McGowan, Andrews and Millot (2017). Zombie companies are defined as firms older than 10 years that during three consecutive years are not able to cover their interest payments with their operating income. The age restriction is imposed to differentiate between real zombie firms and young innovative firms.
← 2. The analysis only considers primary listing on a market different from the one where the company is domiciled as a non‑domestic listing; secondary listings on a non-domestic market are not counted as non‑domestic.
← 3. The definition of control is based on equity shareholdings and the minimum cut-off to be considered a controlled company is if any single public sector owner holds at least 25% of the equity. The selection of 25% of the equity as a cut‑off is based on the fact that most jurisdictions require at least 75% of the votes cast by shareholders to pass a special resolution. Thus a shareholder with more than 25% of the votes can block special resolutions, and is considered as a majority shareholder. This definition may differ from the one provided by the OECD SOE Guidelines, which state that “any corporate entity recognised by national law as an enterprise, and in which the state exercises ownership, should be considered as an SOE”. Importantly, the OECD SOE Guidelines state: “The Guidelines apply to enterprises that are under the control of the state, either by the state being the ultimate beneficiary owner of the majority of voting shares or otherwise exercising an equivalent degree of control.”
← 4. The state holdings correspond to the average within the companies identified as being under state control.