This paper finds that shareholders of highly leveraged firms benefit relatively less compared to bondholders from the corporate quantitative easing (QE) announcements by the European Central Bank and the Bank of England in March 2020, as evidence of debt overhang. Firms more heavily impacted by the pandemic gain less from corporate QE, which could also reflect debt overhang. The monetary and fiscal responses to the pandemic are complements in the sense that a stronger pandemic-related fiscal response and higher pre-announcement sovereign credit default swap (CDS) spreads enhance the positive effects of corporate QE on equity and debt valuations.
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