In order to adequately measure and interpret the cost data, it was necessary to gather detailed information about primary markets in each country. Global and country specific conditions can have an effect on whether a firm can access capital markets. Excessive liquidity conditions can result in an increase in investors’ desire for riskier products, and perhaps allow a host of other issuers to access the market. A wider selection of firms, an increased level of risk, and high investor demand can each in turn affect the pricing of investment bank services to these companies. The nature of the domestic investor base can also play an important role in determining the ability and process by which companies can place debt, and therefore can influence the cost structure of issuing securities. In addition, recent or upcoming changes in regulations have the potential of creating incentives (or disincentives) for firms to incur the costs of public registration or issuance. Furthermore, the actual statistical data about quantities and characteristics of securities can help direct subsequent interview questions; this data also helps to quantify appropriate issuance sizes to benchmark the costs.

The contacts for the interviews were found primarily through word of mouth. Along with personal contacts, initial emails and phone calls to the stock exchanges and regulatory bodies typically yielded additional names of investment bankers responsible for new issues.

Rating agencies are typically quite guarded about the fees they charge, but were able to give pricing parameters under the guarantee of privacy. Both the investment banks and companies were able to provide the range of rating fees as well, to corroborate the results.

# **C.  Difficulties and Assumptions**

As much of the information was gleaned from interviews, two or more sources for the qualitative data were needed to verify and refine the cost data. In particular, the investment bankers and lawyers all represented their fees as a rather wide range (for example, 1-2.5% of the face amount issued). In each country’s case, several discussions occurred to clarify the nature of the pricing mechanism and the state of the market in order to create a more precise estimate of fees. Both in domestic and international deals, a few characteristics tend to filter into the pricing methodology employed by the investment banks. In general, the more risky the deal, the higher the fee the issuer must pay. Risk here can be measured in a few ways: credit quality of the issuer / deal, the maturity of the bond, any options embedded into the security, the size of the deal, and the general state of the market. Furthermore, a plain vanilla bond (or equity) issue is clearly less costly for the lawyer or banker to effect a transaction. A well known, highly rated company will typically pay lower fees. A ten year bond will likely command more fees than a two year.

The state of the market and competition (or lack of) among investment banks can have a large impact on fees charged. For example, after the Argentine crisis in 2001, most investment banks reduced exposure to emerging markets, and the market for new issues dried up. At these times, investment banks charged the high end of the range of fees. Conversely, during the second half of 2003, investor demand for emerging market 5