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Cutting Out the Middleman – The ECB as Corporate Bond Investor

59 Pages Posted: 19 Jun 2017 Last revised: 7 Sep 2017

Benjamin Grosse-Rueschkamp

ESMT European School of Management and Technology

Sascha Steffen

Frankfurt School of Finance & Management

Daniel Streitz

Copenhagen Business School

Date Written: September 6, 2017

Abstract

The European Central Bank’s Corporate Sector Purchase Programme (CSPP), launched in June 2016, increased the supply of capital for eligible Eurozone firms through direct corporate bond purchases. Using a difference-in-difference framework, we document a shift in the composition of credit from loan to bond financing for eligible (i.e., investment-grade rated) firms. High quality investment-grade rated firms increase acquisitions, while BBB rated firms increase cash holdings and capital expenditures. Banks with a high share of investment-grade rated firms increase lending particularly to private but not public firms after the announcement of the CSPP. Our results suggest that the CSPP has positive spillovers to firms that do not have access to bond financing and reduces financial constraints particularly of GIIPS firms with positive effects on the real sector.

Keywords: Monetary policy, CSPP, ECB, financial constraints, bond debt, real effects

JEL Classification: G01, G21, G28

Suggested Citation

Grosse-Rueschkamp, Benjamin and Steffen, Sascha and Streitz, Daniel, Cutting Out the Middleman – The ECB as Corporate Bond Investor (September 6, 2017). Available at SSRN: https://ssrn.com/abstract=2988158

Benjamin Grosse-Rueschkamp

ESMT European School of Management and Technology ( email )

Schlossplatz 1
10117 Berlin
Germany

Sascha Steffen (Contact Author)

Frankfurt School of Finance & Management ( email )

Sonnemannstr. 9 -11
Frankfurt, 60314
Germany

HOME PAGE: http://www.sascha-steffen.de

Daniel Streitz

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

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