Has the ECB’s Monetary Policy Prompted Companies to Invest or Pay Dividends?

Research Institute of Applied Economics Working Paper 2019/01 1/39 pág

39 Pages Posted: 23 Jan 2019

See all articles by Lior Cohen

Lior Cohen

University of Barcelona

Marta Gómez-Puig

Economic Theory Department. University of Barcelona

Simon Sosvilla-Rivero

UCM Institute for Economic Analysis

Date Written: January 17, 2019

Abstract

This paper focuses on how the European Central Bank’s (ECB) monetary policies influenced non-financial firms. The paper’s two main contributions are, first, to shed light on non-financial firms’ decisions on leverage, and how the ECB’s conventional and unconventional policies may have affected them. Second, the paper also examines how these policies influenced non-financial firms decisions on capital allocation – primarily capital spending and shareholder distribution (for example, dividends and shares repurchases). Towards this end, we use an exhaustive and unique dataset comprised of income statements and balance sheets of leading non-financial firms that operate in the European Economic and Monetary Union (EMU). The main results suggest that ECB’s monetary policies have encouraged firms to raise their debt burden especially after the global recession of 2008. Finally, the ECB’s policies, mainly after 2011, seem to have also stimulated non-financial firms to allocate more resources towards not only capital spending but also shareholder distribution.

Keywords: ECB’s monetary policy, capital structure, leverage, quantitative easing, capital expenditure, dividend’s policy, shareholder yield

JEL Classification: E52, E58, G31, G32

Suggested Citation

Cohen, Lior and Gómez-Puig, Marta and Sosvilla-Rivero, Simon, Has the ECB’s Monetary Policy Prompted Companies to Invest or Pay Dividends? (January 17, 2019). Research Institute of Applied Economics Working Paper 2019/01 1/39 pág. Available at SSRN: https://ssrn.com/abstract=3317598 or http://dx.doi.org/10.2139/ssrn.3317598

Lior Cohen

University of Barcelona ( email )

Gran Via de les Corts Catalanes, 585
Barcelona, 08007
Spain

Marta Gómez-Puig

Economic Theory Department. University of Barcelona ( email )

Diagonal 690
Barcelona, 08034
Spain
34-93-4020113 (Phone)
34-93-4039082 (Fax)

Simon Sosvilla-Rivero (Contact Author)

UCM Institute for Economic Analysis ( email )

Carretera de Humera s/n
Madrid, Madrid 28223
Spain
+34913932626 (Phone)

HOME PAGE: http://www.ucm.es/info/ecocuan/ssr/

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