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

Olivier Darmouni and Kerry Siani

No 17191, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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, 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 (search for similar items in EconPapers)
Date: 2022-04
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