Bond Market Stimulus: Firm-Level Evidence from 2020-21

56 Pages Posted: 8 Oct 2020 Last revised: 10 Jan 2022

See all articles by Olivier Darmouni

Olivier Darmouni

Columbia University - Columbia Business School

Kerry Siani

Columbia University - Columbia Business School

Date Written: January 7, 2022

Abstract

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, this could nevertheless be beneficial, as long as bond issuers valued this liquidity highly. However, these firms generally had access to bank liquidity that they chose not to use: many issuers left their credit lines untouched, while others used bond proceeds to repay existing loans. Moreover, equity payouts remained high: over 40% of issuers repurchased shares in Spring 2020.

Keywords: Corporate bonds, unconventional monetary policy, corporate liquidity

JEL Classification: G23, E44, G32, E52

Suggested Citation

Darmouni, Olivier and Siani, Kerry, Bond Market Stimulus: Firm-Level Evidence from 2020-21 (January 7, 2022). Available at SSRN: https://ssrn.com/abstract=3693282 or http://dx.doi.org/10.2139/ssrn.3693282

Olivier Darmouni (Contact Author)

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Kerry Siani

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

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