Financial Frontlines: Assessing the impact of the Russia-Ukraine conflict on the European corporate bond market

Abstract: This paper investigates how European firms accessed the corporate bond market during the Russia-Ukraine war. Using a comprehensive dataset of European bond issues from 2017-2023, we find that fewer bonds were issued during the war than in previous periods, particularly Russian bonds and those denominated in Rubles. Bonds issued during the crisis exhibited higher ratings compared to preceding periods, suggesting that ratings played a significant role for firms raising capital during the war. Consistent with existing evidence on bond maturities and coupon rates in times of crisis, we document that, on average, maturities shortened and coupons increased. Regarding bond spreads, we find that the average bond spread in the war period decreased, potentially influenced by changes in market interest rates. However, for firms that have issued bonds in the past, their average spreads increased, suggesting a market reassessment of perceived risk during the war. Finally, we find that firm characteristics, which explain bond spreads comparatively well in normal times, have reduced explanatory power during the war.