Controlled risk-taking and corporate QE: Evidence from the Corporate Sector Purchase Programme

Pia Stoczek (), Alexander Liss () and Boaz Noiman ()
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Pia Stoczek: Paderborn University
Alexander Liss: KU Leuven
Boaz Noiman: The Hebrew University of Jerusalem

No 142, Working Papers Dissertations from Paderborn University, Faculty of Business Administration and Economics

Abstract: We examine risk-taking by lending syndicates as a response to central banks’ corporate quantitative easing (QE) targeting non-financial firms, specifically within the European Central Bank’s Corporate Sector Purchase Programme (CSPP). This setting allows us to investigate how syndicates adjust to decreased credit demand from CSPP-eligible borrowers in environments characterized by higher risk and lower returns. Our analysis reveals that these syndicates engage in “controlled” risk-taking by directing capital towards first-time and non-relationship borrowers, especially in the leveraged loan sector, while implementing mechanisms to manage increased risk. Our study explores controlled risk-taking across four dimensions. Firstly, we observe adjustments in loan contracting terms, such as stricter collateral requirements and cross-default clauses, coupled with reductions in loan sizes and maturities. Secondly, our findings indicate that syndicate size and the intensity of relationships within syndicates increase. Thirdly, we highlight the influence of the borrower country’s debt enforcement regime on lending decisions. Lastly, we report no significant changes in loan spreads. These results suggest that following corporate QE, syndicates actively utilize risk mitigation mechanisms, demonstrating a cautious approach to managing elevated risks rather than excessive risk-taking.

Keywords: Loan contracting; Relationship lending; Unconventional monetary policy; Quantitative easing (search for similar items in EconPapers)
JEL-codes: E52 E60 G12 G21 G28 G30 (search for similar items in EconPapers)
Pages: 66
Date: 2025-05
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