Demand-Driven Bond Financing in the Euro Area

60 Pages Posted: 26 Mar 2021 Last revised: 1 Sep 2022

See all articles by Stefano Pegoraro

Stefano Pegoraro

University of Notre Dame - Department of Finance

Mattia Montagna

European Central Bank (ECB)

Multiple version iconThere are 2 versions of this paper

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

Pegoraro, Stefano and Montagna, Mattia, Demand-Driven Bond Financing in the Euro Area (December 13, 2021). Available at SSRN: https://ssrn.com/abstract=3791730 or http://dx.doi.org/10.2139/ssrn.3791730

Stefano Pegoraro (Contact Author)

University of Notre Dame - Department of Finance ( email )

P.O. Box 399
Notre Dame, IN 46556-0399
United States
5746312240 (Phone)
46556 (Fax)

Mattia Montagna

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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