The ECB’s APP’s impact on non-financial firms’ cost of borrowing and debt choice

Joana F. Kanda, João M. Pinto and Beatriz P. Silva

Journal of Financial Stability, 2025, vol. 77, issue C

Abstract: We examine the impact of the ECB’s asset purchase programmes on euro area non-financial firms’ cost of borrowing and their choice between corporate bonds and syndicated loans. Our findings indicate that the Corporate Sector Purchase Programme (CSPP) reduced spreads for both eligible and non-eligible corporate bonds, and that ECB purchases of covered bonds positively affected corporate bond spreads. The CSPP also compressed spreads across all syndicated loans, irrespective of eligibility. We find evidence supporting a “cost of borrowing channel” for covered bonds under the first programme and asset-backed securities, indicating that syndicated loan spreads reflect banks’ borrowing costs in the bond market. Additionally, our results reveal that the CSPP significantly influenced firms’ debt financing choices, with these effects being more pronounced for non-switchers.

Keywords: Quantitative easing; LSAP; credit spread; debt choice; bonds versus loans (search for similar items in EconPapers)
JEL-codes: E52 G12 G15 G32 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:77:y:2025:i:c:s1572308925000166

DOI: 10.1016/j.jfs.2025.101387

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