Exploring the Impact of Quantitative Easing Policy on the Business Performance of Construction Companies with the Debt Ratio as a Moderator

Abstract

During the 2008 financial crisis, central banks (such as the Fed) adopted a quantitative easing (QE) policy to stimulate their countries’ economies and overcome severe economic and financial recessions. However, apart from stimulating the economy by issuing a substantial amount of currency to purchase long-term bonds and suppress interest rates, QE policy also contributed to a boom in the real estate and construction sectors. Therefore, this study employs data envelopment analysis to measure the business performance (BP) of construction companies, and explore the impact of QE policy on the BP of construction companies, between 2004 and 2015, using hierarchical regression. We also examine the moderating role of the debt ratio on the relationship. Focused on publicly listed construction companies in Taiwan, this research reveals three encouraging findings. Firstly, QE policy indeed enhanced the BP of Taiwanese construction companies. Secondly, performance improvements in construction companies due to QE policy show a time-diminishing trend, suggesting the importance of seizing the initial policy benefits of QE implementation. Lastly, construction companies with appropriate financial leverage may exhibit better BP. These findings can provide valuable insights for relevant government entities and decision-makers in the industry for policy and investment decisions.