How Did COVID-19 Affect Firms’ Access to Public Capital Markets?*

Abstract

We find that bond issues have substantially increased since the onset of the COVID-19 crisis in calendar week 12 (March 16–20) for bonds rated A or higher, but surprisingly also for bonds rated BBB or lower. In contrast to existing evidence on bond maturities in economic downturns, we document that maturities exceed those of bonds issued before by the same firms as well as the average maturities during normal times. Determinants of corporate bond spreads substantially differ between COVID-19 and normal times. Most prominently, asset tangibility has a highly significant negative effect on spreads during normal times. During COVID-19, this is reversed, especially in industries heavily affected by lockdown measures, reflecting the inflexibility associated with fixed assets. A different picture emerges for equity issues, which slowed considerably during the first 4 weeks of the pandemic, before accelerating again. Capital raised during COVID-19 via equity issues is approximately 5% of capital raised via bond issues.