Bond Market Stimulus: Firm-Level Evidence from 2020-21
59 Pages Posted: 8 Oct 2020 Last revised: 2 Feb 2022
Date Written: January 31, 2022
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: Suggested Citation