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The impact of interest rate changes by the ecb on German companies- financing decisions - contrasting the differences in this century-s most challenging macroeconomic environments
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This thesis analyzes the effects of interest rates and credit risk on German companies’ public
financing decision-making from 2002 to 2022, controlling for macroeconomic indicators. The
results show that a 0.1% absolute increase in the EUR mid-swap rate leads to a 7.451% decrease
in the volume of weekly bond issuances in the observed dataset. This means, in times of higher
interest rates, we can expect German corporates to decrease public lending. Equity issuances
prove to be less affected by interest rates, and more impacted by credit risk in the market. In
times of crisis, the coefficients are noticeably different, showing reversed relationships and
counterintuitive coefficients. The justification of expected and real outcomes considers pecking
order and modified pecking order theories as well as the cost of debt and equity financing.
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Public debt issuance Public equity issuance Cost of equity Cost of debt Monetary policy Ecb Corporate financing decisions Capital structure Economic downturns Credit risk Macroeconomic indicators Capital markets