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Bond Market Development and Bank Risk-Taking: Evidence from Developing Markets

October 3, 2019

DECRG Kuala Lumpur Seminar Series

  • This paper is the first study investigates how bond market development will shape bank risk-taking, in terms of portfolio risks, liquidity risk and overall bank risk. Exploiting a bank-level sample from 26 developing markets from 2006 to 2017, this study finds that bond market development lowers bank portfolio risks and overall risks, as well as strengthens bank liquidity position. Government bond serves as liquid assets that allows banks asset expansion without impairing bank risk positions. Corporate bond works as stable funding and alternative risky asset class that contribute to bank stability while facilitate risky asset holding. Large and well-capitalized banks benefit more from bond market development to take risk while maintaining resilience. This study presents new evidence on the complement role of a well-functioning bond market on bank soundness, offering policy implications on the important of capital market development and a well-balanced bond market structure.

    Download the paper

    Watch and join us at Live Chat: Seminar will be live-streamed, allowing for online audience participation (only available during the seminar)

  • Donghyun Park

    Dr. Donghyun Park is currently Principal Economist at the Economic Research and Regional Cooperation Department (ERCD) of the Asian Development Bank (ADB), which he joined in April 2007. Prior to joining ADB, he was a tenured Associate Professor of Economics at Nanyang Technological University in Singapore. Dr. Park has a Ph.D. in economics from UCLA, and his main research fields are international finance, international trade, and development economics. His research, which has been published extensively in journals and books, revolves around policy-oriented topics relevant for Asia’s long-term development, including middle-income trap, service sector development, and financial sector development. Dr. Park plays a leading role in the production of Asian Development Outlook, ADB’s biannual flagship publication on macroeconomic issues, and leads the team that produces Asia Bond Monitor, ADB’s quarterly flagship report on emerging Asian bond markets.

    Shu Tian

    Dr. Shu Tian is an Economist at the Economic Research and Regional Cooperation Department (ERCD) of the Asian Development Bank (ADB). Prior to joining ADB, she was an Associate Professor of Finance at Fudan University in China. Her main research interests include financial services and institution, investments, and empirical asset pricing. Her research has been published in academic journals on topics relating to financial asset pricing, portfolio allocation and financial market development. Dr. Tian works in the teams that produce Asian Development Outlook and Asia Bond Monitor. Her team also maintains AsianBondsOnline, an online bond market data portal for ASEAN+3 bond markets.


  • WHEN: Thursday, October 3, 2019; 12:30 -2:00PM
  • WHERE: World Bank Malaysia Office, Level 3, Sasana Kijang, No. 2, Jalan Dato’ Onn
  • RSVP: Kindly RSVP by Wednesday, October 2, 2019