The impact of the CSPP on non-financial firms’ cost of borrowing and debt choice

Abstract

This study aims to assess the impact of the CSPP, announced by the ECB in March 2016, on the borrowing cost and debt choice of euro area non-financial firms, following the implementation of asset purchase programmes by several central banks after the 2007-2008 financial crisis. For this analysis, a sample of bonds and syndicated loans denominated in Euros from euro area non-financial firms was selected for the 2000-2019 period. The results indicate a reduction of the cost of borrowing of firms. Bond spreads have decreased due to the CSPP, with stronger effects after the announcement when compared to the period of effective purchases. Similar results are obtained for syndicated loans, with the reduction of spreads. An opposite effect is identified for the period after the announcement of CSPP for the loans that comply with the eligibility requirements of the programme for bonds, with an increase of the spreads. There has also been a change of the debt choice of non-financial firms due to the CSPP, with the increase of the likelihood of a firm issuing bonds versus syndicated loans.

Date of Award	13 Jul 2021
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	João Pinto (Supervisor)