A comparative study on the issuance of long-term commercial papers and corporate bonds from the period 1993 to 2000

This paper, A comparative study on the issuance of long-term commercial papers and corporate bonds, covered the period 1993 to 2000. The year 1993 was the start of the term transformation favoring long-term commercial papers over corporate bonds. The factors used as basis for comparison were as follows: (1) marketability, (2) tenor, (3) interest rates, and (4) pricing. The objectives were: (1) To find out the difference between the issuance of LTCPs and corporate bonds in terms of marketability, interest rates, tenor and pricing (2) To determine why LTCPs are preferred over corporate bonds by companies in the Philippines (3) To provide an account on the success and pitfalls of previous LTCP and corporate bond offerings and (4) To formulate recommendations that will enhance the marketability of LTCPs and corporate bonds. This paper had four hypotheses: The null hypotheses were the following: There is no significant difference between the issuance of LTCPs and corporate bonds in terms of (1) marketability, (2) tenor, (3) interest rates, and (4) pricing. The alternative hypotheses were that there is a significant difference among them. The sample size used was 21 out of a population of 40 companies which have issued LTCP and corporate bonds. Out of the 21 respondents, 19 were LTCP issuers while 2 are issuers of corporate bonds. The level of confidence used was 95%. The independent variables in the conceptual framework were marketability, tenor, interest rates and pricing. On the other hand, the dependent variable was the issuance of LTCPs and corporate bonds. The research design used was a comparative and descriptive research. The 40 companies were evaluated using weighted average cost of capital (WACC). After doing the study, it was found out that LTCPs and corporate bonds are essentially treated the same. But despite their similarities, corporations prefer to issue LTCPs over corporate bonds. At the end of the study, the researchers recommend that the government, the issuers and the investors should fully participate to enhance the marketability of LTCP and corporate bonds