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<p>During the Covid-19 crisis, the Federal Reserve launched the Secondary Market Corporate Credit Facility (SMCCF), committing $250 billion in bond purchases to stabilize corporate debt markets. While the program was formally guided by eligibility criteria, its selective implementation conveyed implicit signals of policy support. We examine whether firms responded to these signals by altering their capital structure. Using a triple differences approach, we find that investment-grade firms in industries where the Fed purchased bonds increased their leverage by 4–7% relative to comparable peers, regardless of whether they were purchased themselves or not. These effects scale with proximity to explicit eligibility—through credit quality—as well as implicit eligibility, such as product market similarity and political connections. Our results highlight how expectations of future support, shaped by selective intervention, can influence real firm behavior.</p>

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Implied future policy promises and firm leverage

  • 期刊论文

  • 发表日期：

    2025年9月30日

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  • Justin Balthrop,
  • Jonathan Bitting

摘要

During the Covid-19 crisis, the Federal Reserve launched the Secondary Market Corporate Credit Facility (SMCCF), committing $250 billion in bond purchases to stabilize corporate debt markets. While the program was formally guided by eligibility criteria, its selective implementation conveyed implicit signals of policy support. We examine whether firms responded to these signals by altering their capital structure. Using a triple differences approach, we find that investment-grade firms in industries where the Fed purchased bonds increased their leverage by 4–7% relative to comparable peers, regardless of whether they were purchased themselves or not. These effects scale with proximity to explicit eligibility—through credit quality—as well as implicit eligibility, such as product market similarity and political connections. Our results highlight how expectations of future support, shaped by selective intervention, can influence real firm behavior.