Exploring the trends and patterns of debt and equity financing through Initial Public Offering (IPO) in Bangladesh

Abstract

Bangladesh is considered a fast-growing emerging economy and the new Asian Tiger. The need for fund in Bangladesh is largely met by banks, mainly due to the underdeveloped nature of the stock market and deterred public trust in it. While some studies stress the need for strengthening the debt and equity securities markets to fuel Bangladesh’s fast economic growth, capital financing through the primary market remains insignificant compared to that arising from the banking sector. Analyzing Bangladesh Securities and Exchange Commission’s long-term data from 1981 to 2022, this paper evaluates the trends and patterns of IPO financing in Bangladesh. Findings suggest that IPOs are much lower in number than what is needed and have not much picked up in recent years. Although the equity market has grown bigger over time, it has not expanded as required mainly due to inadequate importance assigned to it at the policy level and the two market crashes that occurred over the period. The debt market has the lowest visibility and functionality with only a few public issuances. Overall patterns indicate that the securities market historically remains of little significance in supplying capital funds for Bangladesh’s industrialization and economic growth. Findings call for taking a comprehensive approach to increase market size at both the supply and demand ends.