Bond Market Stimulus: Firm-Level Evidence from 2020-21

59 Pages Posted: 8 Oct 2020 Last revised: 2 Feb 2022

See all articles by Olivier Darmouni

Olivier Darmouni

Columbia University - Columbia Business School

Kerry Siani

Columbia University - Columbia Business School

Multiple version iconThere are 2 versions of this paper

Date Written: January 31, 2022

Abstract

Using micro-data on corporate balance sheets, we study firm behavior after the unprecedented policy support to corporate bond markets in 2020. As bond yields fell, firms issued bonds to accumulate large and persistent amounts of liquid assets instead of investing. Conceptually, the benefits depend on how highly bond issuers valued this liquidity at the margin. We show they generally had access to bank liquidity that they chose not to use: many issuers left their credit lines untouched, while others used bonds to repay existing loans. Moreover, equity payouts remained high: almost half of issuers still repurchased shares in Spring 2020.

Keywords: Corporate bonds, unconventional monetary policy, corporate liquidity

JEL Classification: G23, E44, G32, E52

Suggested Citation

Darmouni, Olivier and Siani, Kerry, Bond Market Stimulus: Firm-Level Evidence from 2020-21 (January 31, 2022). Available at SSRN: https://ssrn.com/abstract=3693282 or http://dx.doi.org/10.2139/ssrn.3693282

Olivier Darmouni (Contact Author)

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Kerry Siani

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

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