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

We find that bond issues increased substantially since the onset of the COVID-19 crisis in week 12 (March 16-20). This is the case for bonds rated A or higher, but also for bonds rated BBB or lower, although to a lesser extent. We find that the earliest issuers, issuing in weeks 12 and 13, have mostly ratings A or better, have substantial experience from previous bond issues, and are larger. Over the subsequent crisis weeks, the average issue rating deteriorates, issuers are less experienced and they are smaller. This may be partly due to Fed programs which were announced in week 13, and may have reduced market stress, thereby enabling a broader segment of firms to access the bond market. Compared to their previous issues, firms choose longer maturities during the crisis. Determinants of corporate bond spreads change substantially during COVID-19. Before, asset tangibility has a highly significant negative effect on spreads, but this is not the case in the crisis. Also, in contrast to normal periods, being a dividend payer has a significant spread-increasing effect during the crisis. Finally, experience from past bond issues significantly reduces credit spreads during the crisis, but not in normal periods. We also provide descriptive statistics for equity issuance activities during the COVID-19 crisis. Here a different picture emerges. Issuance activity slowed considerably during the crisis, both in terms of numbers and capital raised, and only recovered in the first two weeks of May.