Download This PaperDemand-Driven Bond Financing in the Euro Area
60 Pages Posted: 26 Mar 2021 Last revised: 1 Sep 2022
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Demand-Driven Bond Financing in the Euro Area
Issuance and Valuation of Corporate Bonds with Quantitative Easing
Date Written: December 13, 2021
Abstract
Using the European Central Bank’s (ECB's) corporate quantitative easing program as a quasi-exogenous change in asset demand, we show corporations act opportunistically and choose the characteristics of their bond issues based on market demand. Characteristics include bonds' eligibility for the program, listing status, seniority, collateralization, guarantees, maturity, and coupon type. The within-firm substitution of eligible-for-ineligible issuance amounted to 55% of the ECB's purchases. We find no evidence firms increased total issuance, investment growth, or equity holders' payoff thanks to their ability to time the market.
Keywords: Bond financing, market timing, capital structure, quantitative easing, CSPP
JEL Classification: G32, G38, E58
Suggested Citation: Suggested Citation
