Olivier Darmouni, Kerry Siani, 29 October 2020

With the spread of COVID-19 and its economic consequences, many firms were in need of increased liquidity. This column documents that instead of relying on bank loans, firms preferred to issue corporate bonds on capital markets. Over 40% of bond issuers left their credit line untouched, and a large share of bond issuance was used to repay existing bank loans. Bond issuance was also used to increase holdings of liquid assets rather than for real investment. This suggests that the V-shaped recovery of bond markets is unlikely to lead to a V-shaped recovery in real activity.

Katie Farrant, Magda Rutkowska, Konstantinos Theodoridis, 09 February 2014

The investment decline in the UK that has followed after the recent crisis is hardly a surprise. What is baffling is that at the same time, corporate bond issuance has remained strong. This column discusses this puzzling pattern and provides possible explanations for it. Heterogeneity among companies is one possible argument, where firms with capital market access invest, and those without – do not. However, evidence from 2012 shows that investment across companies with capital fell as well. Thus, other factors – such as the increased financial uncertainty – could play a role in the investment decisions of companies.


CEPR Policy Research