Quantitative easing and the use of bonds in the debt structure of mergers and acquisitions in the European Union

Abstract

Does quantitative easing impact the ratio of bonds in the capital structure of mergers and acquisitions? This thesis constructs a proprietary dataset using European mergers and acquisitions data, acquirer bond data and a proxy for monetary policy to show that acquirers use a larger ratio of bonds in the capital structure of M&A-transactions under quantitative easing conditions. A one percent decrease in the policy rate is equal to a 20,1% increase in the ratio of bonds in the debt structure of acquiring firms. This relationship helps firm managers in capital structure decisions and policymakers in understanding the effects of monetary policy in practice.