Which Firms Benefit from Corporate QE during the COVID-19 Crisis? The Case of the ECB's Pandemic Emergency Purchase Program

Using an event study methodology, this paper examines how European firms have been affected by the announcement of the European Central Bank's Pandemic Emergency Purchase Program (PEPP). Firms with an investment grade rating benefit relatively...

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Main Authors:	Demirgüç-Kunt, Asli, Horváth, Bálint L., Huizinga, Harry
Format:	Working Paper
Language:	English
Published:	World Bank, Washington, DC 2020
Subjects:	QUANTITATIVE EASING EQUITY RETURN CORONAVIRUS COVID-19 PANDEMIC RESPONSE EUROPEAN CENTRAL BANK PANDEMIC EMERGENCY PURCHASE PROGRAM PEPP CORPORATE DEBT INVESTMENT GRADE DEBT VALUATION DEBT OVERHANG
Online Access:	http://documents.worldbank.org/curated/en/593271599061682497/Which-Firms-Benefit-from-Corporate-QE-during-the-COVID-19-Crisis-The-Case-of-the-ECBs-Pandemic-Emergency-Purchase-Program http://hdl.handle.net/10986/34426

id	okr-10986-34426
recordtype	oai_dc
spelling	okr-10986-344262022-09-20T00:11:34Z Which Firms Benefit from Corporate QE during the COVID-19 Crisis? The Case of the ECB's Pandemic Emergency Purchase Program Demirgüç-Kunt, Asli Horváth, Bálint L. Huizinga, Harry QUANTITATIVE EASING EQUITY RETURN CORONAVIRUS COVID-19 PANDEMIC RESPONSE EUROPEAN CENTRAL BANK PANDEMIC EMERGENCY PURCHASE PROGRAM PEPP CORPORATE DEBT INVESTMENT GRADE DEBT VALUATION DEBT OVERHANG Using an event study methodology, this paper examines how European firms have been affected by the announcement of the European Central Bank's Pandemic Emergency Purchase Program (PEPP). Firms with an investment grade rating benefit relatively more, as evidenced by higher share prices and lower credit default swap spreads, which reflects that the European Central Bank is restricted to purchasing investment grade corporate debt securities. The gains to shareholders relative to the total gains of shareholders and debtholders are negatively related to firm leverage, consistent with the existence of debt overhang. Firms that are more heavily impacted by the pandemic benefit relatively little from the PEPP, which could reflect that the business models of some of these firms heavily damaged by the pandemic. Monetary policy in the form of the PEPP and national fiscal responses to the pandemic are shown to be complements in the sense that a strong pre-PEPP fiscal response enhances the potential for the program to have a positive effect on equity and debt valuations. 2020-09-03T15:48:54Z 2020-09-03T15:48:54Z 2020-09 Working Paper http://documents.worldbank.org/curated/en/593271599061682497/Which-Firms-Benefit-from-Corporate-QE-during-the-COVID-19-Crisis-The-Case-of-the-ECBs-Pandemic-Emergency-Purchase-Program http://hdl.handle.net/10986/34426 English Policy Research Working Paper;No. 9379 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Europe and Central Asia Central Asia Eastern Europe Europe and Central Asia
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	QUANTITATIVE EASING EQUITY RETURN CORONAVIRUS COVID-19 PANDEMIC RESPONSE EUROPEAN CENTRAL BANK PANDEMIC EMERGENCY PURCHASE PROGRAM PEPP CORPORATE DEBT INVESTMENT GRADE DEBT VALUATION DEBT OVERHANG
spellingShingle	QUANTITATIVE EASING EQUITY RETURN CORONAVIRUS COVID-19 PANDEMIC RESPONSE EUROPEAN CENTRAL BANK PANDEMIC EMERGENCY PURCHASE PROGRAM PEPP CORPORATE DEBT INVESTMENT GRADE DEBT VALUATION DEBT OVERHANG Demirgüç-Kunt, Asli Horváth, Bálint L. Huizinga, Harry Which Firms Benefit from Corporate QE during the COVID-19 Crisis? The Case of the ECB's Pandemic Emergency Purchase Program
geographic_facet	Europe and Central Asia Central Asia Eastern Europe Europe and Central Asia
relation	Policy Research Working Paper;No. 9379
description	Using an event study methodology, this paper examines how European firms have been affected by the announcement of the European Central Bank's Pandemic Emergency Purchase Program (PEPP). Firms with an investment grade rating benefit relatively more, as evidenced by higher share prices and lower credit default swap spreads, which reflects that the European Central Bank is restricted to purchasing investment grade corporate debt securities. The gains to shareholders relative to the total gains of shareholders and debtholders are negatively related to firm leverage, consistent with the existence of debt overhang. Firms that are more heavily impacted by the pandemic benefit relatively little from the PEPP, which could reflect that the business models of some of these firms heavily damaged by the pandemic. Monetary policy in the form of the PEPP and national fiscal responses to the pandemic are shown to be complements in the sense that a strong pre-PEPP fiscal response enhances the potential for the program to have a positive effect on equity and debt valuations.
format	Working Paper
author	Demirgüç-Kunt, Asli Horváth, Bálint L. Huizinga, Harry
author_facet	Demirgüç-Kunt, Asli Horváth, Bálint L. Huizinga, Harry
author_sort	Demirgüç-Kunt, Asli
title	Which Firms Benefit from Corporate QE during the COVID-19 Crisis? The Case of the ECB's Pandemic Emergency Purchase Program
title_short	Which Firms Benefit from Corporate QE during the COVID-19 Crisis? The Case of the ECB's Pandemic Emergency Purchase Program
title_full	Which Firms Benefit from Corporate QE during the COVID-19 Crisis? The Case of the ECB's Pandemic Emergency Purchase Program
title_fullStr	Which Firms Benefit from Corporate QE during the COVID-19 Crisis? The Case of the ECB's Pandemic Emergency Purchase Program
title_full_unstemmed	Which Firms Benefit from Corporate QE during the COVID-19 Crisis? The Case of the ECB's Pandemic Emergency Purchase Program
title_sort	which firms benefit from corporate qe during the covid-19 crisis? the case of the ecb's pandemic emergency purchase program
publisher	World Bank, Washington, DC
publishDate	2020
url	http://documents.worldbank.org/curated/en/593271599061682497/Which-Firms-Benefit-from-Corporate-QE-during-the-COVID-19-Crisis-The-Case-of-the-ECBs-Pandemic-Emergency-Purchase-Program http://hdl.handle.net/10986/34426
_version_	1764480872817360896

Which Firms Benefit from Corporate QE during the COVID-19 Crisis? The Case of the ECB's Pandemic Emergency Purchase Program

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