Annals of the „Constantin Brâncuşi” University of Târgu Jiu, Economy Series, Issue 3/2014 „ACADEMICA BRÂNCUŞI” PUBLISHER, ISSN 2344 – 3685/ISSN-L 1844 - 7007 OVERVIEW OF THE ROMANIAN CORPORATE BONDS’ MARKET BETWEEN 1997-2013 BUNESCU LILIANA TEACHING ASSISTANT, PH.D., “LUCIAN BLAGA” UNIVERSITY OF SIBIU, ROMANIA, E-mail: liliana_sibiu@yahoo.com Abstract This paper contains an analysis of the corporate bonds’ market in Romania between 1997 and 2013 by using data contained in the 27 public offerings of corporate bonds made by national or international companies. Among the features of bond loans, that were used in this research, are: the nominal value of a bond, the loan type and interest rate, issuers and their economic sectors, maturity, type of bonds, state of trading, different conditions imposed to investors etc. At the end of the work paper were highlighted funding costs and the risks that it incurs. Key words: Capital market, corporate bonds, corporate bonds’ market, corporate bonds’ issue Classification JEL: G32 1.Introduction The corporate bond s’ market is just one sector of the wider capital market. As well as sovereign and supranational borrowers, a range of participants in the economy, from SMEs to multinational conglomerates and financial institutions, compete to borrow investors’ funds to use them. For the corporate sector, bonds are one component in the mix of funding methods which also includes equity capital and retained earnings, bank loans, syndicated loans, and other forms of borrowing. [8] Corporate bond s’ markets have become an increasingly important source of financing for the private sector in recent years, especially for some emerging market countries. Previously, corporate borrowing had centered on around the banking sector in many countries. However, several banking crises in emerging countries had led to the realization that the sources of corporate borrowing need to be diversified. [9] In 2013, International Capital Market Association (ICMA) published a paper about why corporate bond markets are so important for economic growth, for investors, for companies, and for governments, around the world; and why it is therefore essential that laws and regulations that affect them avoid any unintended adverse consequences that could inhibit those markets. Everyone has a common interest in corporate bond s’ markets to work well for the private and public good. [8] This is important for the authorities and for market participants because if they do not get it right, enterprises and citizens, who are both taxpayers and customers of the market, will suffer. Bonds are commonly referred to as “unmonitored” lending because of the dispersed pool of bond investors who can not or choose not to “monitor”, or influence, the business activities of the bond issuers. In contrast, banks specialize and spend resources to acquire information and monitor borrowers, which typically results in a higher cost of lending. [5] A report made by Centre for Economic Policy Research (2006) offers an in-depth analysis of the European corporate bond market. This report underline that some liquidity problems are specific to the bond market, the market revolves around dealers, whose intermediation services offer some answers to these problems and the euro- denominated bonds segment is much more active and liquid than the sterling-denominated segment. Pipat L. and Li Lian Ong (2005) consider that improvements in market regulation and infrastructure are crucial for the development of local securities markets. [9] The demand and supply of corporate bonds are dependent on factors such as the investor base, both local and foreign, and government policies toward the issuance process and associated costs, as well as the taxation regime. The literature about corporate bonds consists in a large number of working papers on bonds valuation, liquidity, bonds indices, transparency, eficiency etc. Castillo A. (2004) concentrated on the valuation of different types of corporate bonds, in a scenario characterized by many stochastic variables interacting to determine the value of the assets of a company, and where interest rates are also assumed to follow a stochastic process. The valuation methodology proposed by him is a hybrid of simulation and dynamic programming and corresponds to an extension of the method proposed by Raymar and Zwecher in 1997 to value financial American-type options. [3] Dick-Nielsen J., Feldh P., Lando D. (2012) analyzed liquidity components of corporate bond spreads during 2005–2009 using a new robust illiquidity measure. They concluded that the spread contribution from illiquidity increases dramatically with the onset of the subprime crisis. According to their research, the increase is slow and persistent for investment grade bonds while the effect is stronger but more short-lived for speculative grade bonds. [6] Biais B., Declerck F. (2013) offered a study of the microstructure of the European corporate bond market. They documented how transactions costs in 168