The impact of unconventional monetary policy on firm financing constraints: Evidence from the maturity extension program

Nathan Foley-Fisher, Rodney Ramcharan and Edison Yu

Journal of Financial Economics, 2016, vol. 122, issue 2, 409-429

Abstract: This paper investigates the impact of unconventional monetary policy on firm financial constraints using the maturity extension program (MEP). Consistent with bond market segmentation and limits to arbitrage, around the MEP's announcement, stock prices rose for those firms more dependent on longer-term debt. These firms also issued more long-term debt during the MEP and expanded employment and investment. There is also evidence of “reach for yield” behavior, as the demand for riskier corporate debt also increased. Our results suggest that unconventional monetary policy might have relaxed financial constraints for some firms by inducing gap-filling behavior and affecting bond market risk premia.

Keywords: Unconventional monetary policy; Firm-financial constraints; Bond markets (search for similar items in EconPapers)
JEL-codes: E52 G23 G32 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (85)

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Related works:
Working Paper: The Impact of Unconventional Monetary Policy on Firm Financing Constraints: Evidence from the Maturity Extension Program (2016)
Working Paper: The impact of unconventional monetary policy on firm financing constraints: evidence from the maturity extension program (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:122:y:2016:i:2:p:409-429

DOI: 10.1016/j.jfineco.2016.07.002

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