The Information Content of Central Bank Disclosures: Firm-Level Evidence from the ECB Collateral Haircuts

Abstract

This paper explores firm-specific disclosures by central banks, specifically the ECB's collateral haircuts on nonfinancial corporate bonds. We find that revisions in collateral haircuts have economically meaningful effects; these updates are associated with reactions in bond bid-ask spreads and issuer credit default swap spreads representing 2.3-3.7 percent of sample averages, and predict future changes in issuers' credit ratings and financial health. We further show that the impact of these haircut revisions is more pronounced for issuers that are riskier or have bank debt and in periods of greater uncertainty. Our study contributes to the understanding of the firm-level relevance of central-bank information and provides new insights into the role of collateral haircut policies.

Keywords: debt market, monetary policy, collateral haircuts, liquidity, credit ratings, value relevance, performance prediction

JEL Classification: E58, G14, G15, G21, G28, M41