Negative Interest Rates, COVID-19, and the Finances of Listed Euro Firms

  • Henk von Eije University of Groningen
Keywords: Negative interest rates, European Central Bank, German government bond yields, short-term firm financing, liquidity ratios, debtor ratios, creditor ratios, dividends, long-term borrowing cash flows, non-liquid investments, corona crisis, COVID-19


Aim: The paper measures the impact of negative interest rates on listed firms in the original euro zone countries. It also measures the impact of the first COVID-19 year.

Design / research methods: The paper uses panel data to measure the influence of the short-term ECB deposit rate and the 10-years German bond yield on short-term and long-term firm variables. Cross section fixed effects are applied to first differences and dummy variables. For liquidity and non-liquid assets the effects are also measured for small and large companies, for sectors, and for countries.

Conclusions / findings: Corporate liquidity ratios and creditor ratios decline when short-term ECB-rates fall. If ECB rates are negative, liquidity ratios are further reduced by 0.6 percentage points. Declining long-term German government bond yields increase non-liquid assets, while negative yields boost these assets by 4.5% extra. In the first COVID-19 year, the investments in non-liquid assets were 7.6% smaller, while liquidity ratios increased by 2.3 percentage points.

Originality / value of the article: Papers on the influence of negative interest rates and of COVID-19 on European firms are unavailable. This makes the paper relevant for firm managers and policy makers and a benchmark for future research.

Implications of the research: Because the issues addressed are new, further research is valuable. One may think of comparable studies for different countries. Many other suggestions for further research are given in the conclusions.


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