Quantitative Easing and Corporate Innovation

Abstract

We document a strong and heterogeneous response of corporate R&D investment to changes in debt financing conditions induced by corporate debt purchases under the ECB's QE Program. Companies eligible for the program increase significantly their investment in R&D, relative to similar ineligible companies operating in the same country and sector. This effect is limited to firms with low leverage and with high levels of prior innovation. In contrast, QE-eligible companies with no history of innovation only increase dividend payments. Finally, credit constraints do not appear to matter for the response of R&D investment to QE.

Keywords: asset purchases, Corporate innovation, Real effects, Unconventional Monetary Policy

JEL Classification: E5, G10, O3