The Impact of the Bank of Japan’s Exchange Traded Fund and Corporate Bond Purchases on Firms’ Capital Structure

Nguyen Thuy Linh

No DP21-1, RCESR Discussion Paper Series from Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University

Abstract: This study examines the effects of the Bank of Japan’s (BOJ’s) exchange traded fund (ETF) and corporate bond (CB) purchases on the capital structure of Japanese listed firms. The results suggest that following the expansion of ETF purchases, treatment firms actively issued more stocks and became less dependent on bond debt and bank loans than control firms, resulting in a lower level of leverage. In contrast, following the introduction of CB purchases, firms whose bonds were eligible for CB purchases issued more corporate bonds, while reducing long-term bank debt by a smaller extent, thus they have a higher leverage ratio than ineligible firms. Moreover, evidence further suggests the existence of an interaction between these two purchasing programs. These results indicate that the BOJ’s ETF and CB purchases have had a considerable impact, implying that the supply of capital plays an important role in determining firms’ capital structure.

Keywords: Unconventional monetary policy; Risk asset purchases; Difference in differences; Capital structure; Supply-side effects (search for similar items in EconPapers)
JEL-codes: E52 E58 G32 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2021-01
New Economics Papers: this item is included in nep-cba, nep-cfn, nep-cwa, nep-fmk, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:hit:rcesrs:dp21-1

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