Kauppatieteellinen tiedekunta, 2017
Laskentatoimi ja rahoitus
Master's Degree Programme in Finance
The purpose of this thesis is to investigate if and how the European Central Bank’s asset purchase programs have impacted on corporate bond issuance in different industries in Europe. The asset purchase programs started in 2009 after the global financial crisis when the ECB launched its first covered bond purchase program to stimulate the economic activity in Europe. Since then the ECB has launched several asset purchase programs.
The bond issuance data are collected from the Thomson Reuters DataStream database and the data contains 4149 debt securities from Europe. The bonds are aggregated into a nine major industry groups according to the Standard Industrial Classification codes (SIC-codes). The investigated sample period is between 2006 and 2016.
The regression analysis contains several explanatory variables that aim to control the impacts of industry shocks and market conditions. The results reveal that the ECB’s asset holdings have a significant positive impact on corporate bond issuance in eight out of nine investigated industries. The impact is statistically significant in all eight industries at 1% confidence level. The results are tested with different econometric techniques, which confirm the robustness of the results.
From a theoretical point of view, the obtained results can be supported with the gap filling and portfolio rebalancing theories. These theories suggest that the ECB’s asset purchases create a gap in the market for a certain types of securities that were purchased away by the ECB. At the same time, investors are forced to seek new investments to replace the securities that were acquired away. The increased demand, improved liquidity and the gap in the market encourage firms to increase their bond issuance.
Asset purchase program, Corporate bond, Central bank, Industry