The impact of the Eurosystem’s covered bond purchase programs on firms’ cost of borrowing

Abstract

The purpose of my thesis is to test the impact of the three covered bond purchase programs made by the European Central Bank (CBPP1, CBPP2 and CBPP3) on the cost of financing of eurozone companies. For this analysis I use a sample of 2644 corporate bonds issued in the eurozone during the 2000-2019 period, in order to measure the effects of these three European Central Bank programs on the spread of corporate bonds. The results show that (1) CBPP1 and CBPP3 concluded with their objective of reducing the cost of financing companies in the eurozone, by reducing the spread of corporate bonds. However, CBPP2 did not obtain the same result having increased this spread, (2) the effect of these programs was consistent between countries, as the bond spread had the same direction both in the “GIIPS” (Greece, Italy, Ireland, Portugal and Spain) as in the rest of the eurozone countries and (3) in the three programs, there was a more pronounced impact on the “GIIPS”, suggesting that these covered bond purchase programs have more relevance on the financing cost of companies in countries with higher credit risk.

Date of Award	14 Jul 2021
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Paulo Alves (Supervisor)