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“Has the ECB’s Monetary Policy Prompted Companies to Invest or Pay Dividends?”

Author

Listed:
  • Lior Cohen

    () (Department of Economics. Universidad de Barcelona.)

  • Marta Gómez-Puig

    () (Department of Economics and Riskcenter, Universidad de Barcelona.)

  • Simón Sosvilla-Rivero

    () (Complutense Institute for Economic Analysis, Universidad Complutense de Madrid.)

Abstract

This paper focuses on how the European Central Bank’s (ECB) monetary policies influenced non-financial firms. The paper’s two main contributions are, first, to shed light on non-financial firms’ decisions on leverage, and how the ECB’s conventional and unconventional policies may have affected them. Second, the paper also examines how these policies influenced non-financial firms’ decisions on capital allocation – primarily capital spending and shareholder distribution (for example, dividends and shares repurchases). Towards this end, we use an exhaustive and unique dataset comprised of income statements and balance sheets of leading non-financial firms that operate in the European Economic and Monetary Union (EMU). The main results suggest that ECB’s monetary policies have encouraged firms to raise their debt burden especially after the global recession of 2008. Finally, the ECB’s policies, mainly after 2011, seem to have also stimulated non-financial firms to allocate more resources towards not only capital spending but also shareholder distribution

Suggested Citation

  • Lior Cohen & Marta Gómez-Puig & Simón Sosvilla-Rivero, 2019. "“Has the ECB’s Monetary Policy Prompted Companies to Invest or Pay Dividends?”," IREA Working Papers 201901, University of Barcelona, Research Institute of Applied Economics, revised Jan 2019.
  • Handle: RePEc:ira:wpaper:201901
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    File URL: http://www.ub.edu/irea/working_papers/2019/201901.pdf
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    References listed on IDEAS

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    Keywords

    ECB’s monetary policy; capital structure; leverage; quantitative easing; capital expenditure; dividend’s policy; shareholder yield. JEL classification:E52; E58; G31; G32.;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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