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The Impact of the Bank of Japan’s Exchange Traded Fund and Corporate Bond Purchases on Firms’ Capital Structure

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  • Linh, Nguyen Thuy

Abstract

This study examines the effects of the Bank of Japan’s (BOJ’s) exchange traded fund (ETF) and corporate bond (CB) purchases on the capital structure of Japanese listed firms. The results suggest that following the expansion of ETF purchases, treatment firms actively issued more stocks and became less dependent on bond debt and bank loans than control firms, resulting in a lower level of leverage. In contrast, following the introduction of CB purchases, firms whose bonds were eligible for CB purchases issued more corporate bonds, while reducing long-term bank debt by a smaller extent, thus they have a higher leverage ratio than ineligible firms. Moreover, evidence further suggests the existence of an interaction between these two purchasing programs. These results indicate that the BOJ’s ETF and CB purchases have had a considerable impact, implying that the supply of capital plays an important role in determining firms’ capital structure.

Suggested Citation

  • Linh, Nguyen Thuy, 2021. "The Impact of the Bank of Japan’s Exchange Traded Fund and Corporate Bond Purchases on Firms’ Capital Structure," RCESR Discussion Paper Series DP21-1, Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:rcesrs:dp21-1
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    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/71076/dp21-1_rcesr.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Unconventional monetary policy; Risk asset purchases; Difference in differences; Capital structure; Supply-side effects;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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