Non-financial corporations - statistics on financial assets and liabilities - Statistics Explained

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Non-financial corporations - statistics on financial assets and liabilities


Data extracted in November 2020.

Planned article update: December 2021.

Highlights

In 2019, EU-27 total financial assets and liabilities of non-financial corporations (including equity and investment fund shares) were valued at €31 983 billion and €46 231 billion respectively.

EU-27 corporate debt increased from 97.7 % of GDP in 2009 to 99.8 % in 2019, while EU-27 corporate financial leverage (the debt/equity ratio) fell from 73.6 % to 53.3 % during the same period.

Developments for total financial assets and liabilities of non-financial corporations, EU-27 and EA-19, 2009-2019
(billion EUR)
Source: Eurostat (nasa_10_f_bs)

This article focuses on the annual stock of financial assets and liabilities for non-financial corporations in the European Union (EU) and the euro area; note there is a complementary article that provides similar information for financial assets and liabilities of households.

The non-financial corporations sector comprises all private and public corporate enterprises that produce goods or provide non-financial services to the market. Across the EU-27, the financial assets of non-financial corporations mainly comprise equity and investment fund shares, loans, other accounts receivable, and currency and deposits. The financial liabilities of non-financial corporations mainly comprise equity and investment fund shares, loans and other accounts payable.

The data presented in this article relate to a detailed set of non-consolidated financial balance sheets for the non-financial corporations sector released by Eurostat. Note that statistics detailing the financial account may be consolidated or non-consolidated; the latter record not only transactions between sectors but also transactions within the same sector.

The article provides an analysis of financial assets and liabilities of non-financial corporations across the EU-27 and the euro area (EA-19), as well as for individual EU Member States, the United Kingdom, three EFTA countries and Turkey for the latest year available (2019) and for developments over the previous 10 years. Some indicators are presented in relation to gross domestic product (GDP), which is beneficial for making cross-country comparisons, especially between countries of different size.

Full article

Value of assets and liabilities in the EU

The value of financial liabilities for non-financial corporations was much greater than the value of their financial assets

Total financial assets of non-financial corporations in the EU-27 were valued at €31 983 billion in 2019 (see Figure 1); this was much lower than the value of their financial liabilities, which stood at €46 231 billion.

In 2009, the value of financial assets of EU-27 non-financial corporations was equivalent to 63.6 % of the value of financial liabilities. However, this ratio rose in successive years to reach 69.3 % in 2018, before falling marginally to 69.2 % in 2019.

Having fallen during the global financial and economic crisis, there was a marked rise in the value of financial assets and liabilities of non-financial corporations in the EU-27 and the euro area for most years after 2009. The value of assets and liabilities increased in 2010, remained relatively unchanged in 2011, and then followed an upward development throughout the period 2012 to 2017. In 2018, a relatively slight fall was observed for financial assets and liabilities for the EU-27 and the euro area, before strong growth returned in 2019. Overall, the value of financial assets of non-financial corporations in the EU-27 increased 73.9 % (in current price terms) between 2009 and 2019, while the increase for liabilities was 60.0 %. As noted earlier, the data presented are for non-consolidated financial balance sheets and some of the developments may reflect changes in assets and liabilities within the non-financial sector, for example in the form of intra-company loans.

Corporate debt, defined as debt securities and loans as a percentage of GDP, is an important measure of the financial solvency of non-financial corporations. Between 2009 and 2019 corporate debt increased from 97.7 % to 99.8 % of GDP. The debt to equity ratio, defined as debt securities and loans divided by equity and investment fund shares, is an important measure of financial leverage. Between 2009 and 2019 this ratio fell from 73.6 % to 53.3 %.

Figure 1: Developments for total financial assets and liabilities of non-financial corporations, EU-27 and EA-19, 2009-2019
(billion EUR)
Source: Eurostat (nasa_10_f_bs)

Assets and liabilities relative to GDP in the EU

Financial liabilities of EU-27 non-financial corporations valued just over three times as high as GDP

The ratio of financial assets and liabilities relative to GDP is shown in Figure 2. The financial assets and liabilities of non-financial corporations in the EU-27 represented, on average, 199.8 % and 299.4 % of GDP during the period covering 2009-2019.

The ratio for total financial assets of EU-27 non-financial corporations was 173.7 % (relative to GDP) in 2009 (having recovered from a low in 2008), while the ratio for financial liabilities was 272.9 % the same year. In 2019, the financial assets of EU-27 non-financial corporations were valued at 229.0 % (relative to GDP), while financial liabilities were valued at 331.1 %; both of these values were higher than the corresponding ratios recorded in 2018.

Figure 2: Developments for total financial assets and liabilities of non-financial corporations relative to GDP, EU-27 and EA-19, 2009-2019
(%, relative to GDP)
Source: Eurostat (nasa_10_f_bs)

Structure of assets and liabilities in the EU

Equity and investment fund shares: the most prominent form of asset and liability

Equity and investment fund shares, other accounts receivable, loans, and currency and deposits together made up 98.3 % of the total financial assets of EU-27 non-financial corporations in 2019 (see Figure 3). Equity and investment fund shares accounted for the highest share, around half of the total (52.9 %). Within this instrument category, equity accounted for around 97 % of the total.

Figure 3: Financial assets of non-financial corporations by financial instrument, EU-27, 2019
(% share of total financial assets of non-financial corporations)
Source: Eurostat (nasa_10_f_bs)

In 2019, equity and investment fund shares, loans, other accounts payable, and debt securities together made up 98.7 % of the total financial liabilities of EU-27 non-financial corporations (see Figure 4). The share of equity and investment fund shares in total financial liabilities was even higher than for assets, reaching 56.6 % with equity liabilities accounting for all of this instrument category.

Figure 4: Financial liabilities of non-financial corporations by financial instrument, EU-27, 2019
(% share of total financial liabilities of non-financial corporations)
Source: Eurostat (nasa_10_f_bs)

Developments in the EU

The information presented in Figures 5 and 6 is in the form of indices, each series starting with a value of 100 in 2009. It is important to bear in mind the relative weight of each financial instrument in total financial assets and liabilities (as shown in Figures 3 and 4) when considering their developments over time. Furthermore, as noted earlier, the data presented are for non-consolidated financial balance sheets and some of the developments may reflect changes in assets and liabilities within the non-financial sector.

During the period 2009-2019, there was steady uninterrupted growth in the value of loans that were held as financial assets by EU-27 non-financial corporations (see Figure 5); a similar pattern with slightly lower growth rates was observed for currency and deposits. By contrast, there was a more mixed development for equity and investment fund shares, as their asset value rose sharply between 2009 and 2010, fell slightly in 2011, then continued their relatively steep upward progression through to 2017 before falling in 2018 and rebounding strongly in 2019.

It should be noted that the values of equity and investment fund shares, debt securities and financial derivatives are affected by changes in prices of these instruments in financial markets.

Figure 5: Developments for financial assets of non-financial corporations by financial instrument, EU-27, 2009-2019
(index, 2009 = 100)
Source: Eurostat (nasa_10_f_bs)

Figure 6 shows similar information for the development of various financial liabilities held by EU-27 non-financial corporations. The value of liabilities for each financial instrument was higher in 2019 than in 2009, with some relatively large fluctuations from one year to the next during the period under consideration. This was particularly notable for financial derivatives and employee stock options (note however, that these accounted for just 0.3 % of total financial liabilities in 2019).

In a similar development to that for assets, the value of liabilities for equity and investment fund shares recovered rapidly after 2009 and followed a generally upward path (apart from falls in 2011 and 2018). By contrast, there was a relatively slow upward development for the second most used instrument, loans, as the value of liabilities rose by 1.8-6.1 % per year during the period 2009-2019, aside from a modest reduction in 2013 (down 0.5 %).

Figure 6: Developments for financial liabilities of non-financial corporations by financial instrument, EU-27, 2009-2019
(index, 2009 = 100)
Source: Eurostat (nasa_10_f_bs)

Share of EU Member States

France held nearly one third of the EU-27’s financial assets of non-financial corporations and more than one quarter of its liabilities

Figure 7 shows the share of each EU Member State in the total financial assets and liabilities of non-financial corporations in the EU-27; note that the figure is split into two parts with different scales on the y-axes.

In 2019, non-financial corporations in France held the highest share (32.7 %) of financial assets held by non-financial corporations in the EU-27, followed by those from Germany (15.2 %), Spain (8.7 %) and the Netherlands (8.6 %). French non-financial corporations also had the highest share (27.6 %) of EU-27 financial liabilities, followed by non-financial corporations from Germany (14.7 %), Spain (9.3 %), Italy (8.3 %) and the Netherlands (7.9 %).

A comparison between the shares of financial assets and financial liabilities for each EU Member State reveals that these were generally quite similar. However, non-financial corporations in France held a considerably higher share of the EU-27’s total financial assets than their share of EU-27 total financial liabilities (a difference of 5.1 percentage points), while the opposite was true in Italy, as its share of EU-27 financial liabilities was 2.4 points higher than its share of financial assets.

It is interesting to note that some of the relatively small EU Member States accounted for quite high shares of EU-27 financial assets and liabilities. This was particularly true for non-financial corporations in Ireland and Luxembourg, which may reflect, at least in part, the activities of multinational corporations and the impact of foreign direct investment (FDI); note that the majority of the indigenous non-financial corporations in these economies are relatively small and are largely reliant on domestic credit institutions, while multinationals tend to have much greater access to a broader range of international sources of finance.

Figure 7: Member States’ share of total financial assets and liabilities of non-financial corporations, 2019
(% of EU-27 total)
Source: Eurostat (nasa_10_f_bs)

Developments in the EU Member States

Average annual rates of change for total financial assets and liabilities of non-financial corporations are shown in Figure 8. Across the whole of the EU-27, financial assets rose, on average, by 5.7 % per year during the period 2009-2019, while the growth rate for financial liabilities was somewhat lower at 4.8 % per year. Once more it should be remembered that the data presented are for non-consolidated financial balance sheets and some of the developments may reflect changes in assets and liabilities within the non-financial sector.

Among the EU Member States, the highest average annual growth rates for the period 2009-2019 were recorded in Ireland, with the value of financial assets held by non-financial corporations rising on average by 15.6 % per year, while the value of financial liabilities rose by an average of 14.9 %. Non-financial corporations in Malta had the second highest growth in financial assets, while Denmark had the second highest growth in liabilities.

A majority (21) of EU Member States saw the value of their non-financial corporations’ financial assets and liabilities rise on average by 1.0-10.0 % per year, although there were several Member States where growth was more subdued or where the values of assets were actually lower in 2019 than in 2009. Greece, Romania and Luxembourg recorded lower values for assets, while the speed at which financial assets of non-financial corporations grew was relatively subdued in Slovenia. There was no growth in financial liabilities in Slovenia and growth was below 1.0 % per year in Greece and Italy.

Figure 8: Average annual rate of change for total financial assets and liabilities of non-financial corporations, 2009-2019
(%)
Source: Eurostat (nasa_10_f_bs)

The value of financial assets for Irish non-financial corporations relative to GDP was 2.0 times as high in 2019 as it had been in 2009

Figure 9 shows the value of financial assets and liabilities relative to GDP in 2009 and 2019. In keeping with the overall figures for the EU-27 it was common among the EU Member States to find that these ratios generally rose during the period under consideration.

In Ireland, the value of total financial assets of non-financial corporations relative to GDP was 2.0 times as high in 2019 as it had been in 2009, while the next highest rates of change were recorded in France (note that there is a break in series) and the Netherlands (another economy where multinational corporations play a relatively important role). Despite a reduction in their value of financial assets relative to GDP, non-financial corporations in Luxembourg continued to record the highest ratio among the EU Member States (560 % in 2019). Aside from Luxembourg, there were seven other EU Member States where a decline was reported between 2009 and 2019: Portugal, Czechia, Latvia, Belgium, Greece, Slovenia and Romania.

The value of total financial liabilities of non-financial corporations relative to GDP also rose at a rapid pace in Ireland: the value of liabilities was 1.9 times as high in 2019 as in 2009. The ratio of the value of financial liabilities to GDP peaked in Ireland at 763 % in 2019, followed by Luxembourg (716 %) and Sweden (618 %). There were 12 EU Member States where a decline was reported when comparing the value of financial liabilities relative to GDP between 2009 and 2019: Cyprus, Belgium, Italy, Hungary, Latvia, Portugal, Lithuania, Bulgaria, Czechia, Slovenia, Luxembourg and Romania.

Figure 9: Total financial assets and liabilities of non-financial corporations relative to GDP, 2009 and 2019
(%, relative to GDP)
Source: Eurostat (nasa_10_f_bs)

Structure of assets and liabilities in the EU Member States

The final two figures in this article present information relating to an analysis of financial assets (Figure 10) and financial liabilities (Figure 11) by financial instrument.

As already shown, across the EU-27 equity and investment fund shares were the principal instrument held by non-financial corporations for both assets and liabilities. This pattern was repeated in a majority of the EU Member States in 2019, with equity and investment fund shares accounting for at least half of the total value of the financial assets held by non-financial corporations in Denmark, Ireland, Belgium, the Netherlands, Spain, Sweden and France. In the Member States where equity and investment fund shares did not record the highest share of total financial assets, it was common to find that the principal instrument was other accounts receivable/payable, the only exceptions being Greece (where close to half of all financial assets were held as currency/deposits) and Malta (where the share of loans was marginally greater than that of other accounts receivable/payable).

Figure 10: Financial assets of non-financial corporations by financial instrument, 2019
(% share of total financial assets of non-financial corporations)
Source: Eurostat (nasa_10_f_bs)

In 2019, equity and investment fund shares accounted for the highest proportion of total financial liabilities of non-financial corporations in all but two of the EU Member States. Their share of total financial liabilities was above 50.0 % in 15 Member States, with shares of more than 60.0 % in Denmark, the Netherlands, Spain, France and Sweden (where the highest share was recorded, 67.1 %). In Malta, loans were the principal instrument held by non-financial corporations and their share of total financial liabilities was 42.6 %. Romania was also an exception insofar as it was the only Member State to report that other accounts receivable/payable were the principal liability of non-financial corporations (44.1 % of total financial liabilities in 2019).

Figure 11: Financial liabilities of non-financial corporations by financial instrument, 2019
(% share of total financial liabilities of non-financial corporations)
Source: Eurostat (nasa_10_f_bs)

Source data for tables and graphs

The detailed tables are available here Excel.jpg

Data sources

The compilation of financial accounts follows the European System of Accounts 2010 (ESA 2010).

The financial account and balance sheet

Eurostat’s website includes detailed financial accounts by country. Financial accounts are published in consolidated and non-consolidated forms; within this article the latter are presented. As a rule, the accounting entries in ESA 2010 are non-consolidated, as a consolidated financial account requires information on the counterpart grouping of institutional units. Note that data for the EU-27 and euro area (EA-19) aggregates are calculated as a sum of data for EU Member States; no adjustment is made for flows between Member States.

The non-financial corporations sector

In general, sole proprietorships and most partnerships that do not have an independent legal status are considered to be part of the household sector, rather than as corporations (financial or non-financial). However, there are sometimes practical difficulties in delineating ‘quasi-corporations’ (unincorporated businesses with the characteristics of companies) between corporations on one hand and the household sector on the other, which may influence the scope and comparability of the data presented as well as the internal consistency of the full set of accounts.

Context

Financial accounts form part of the national accounting framework, and are compiled in the EU in accordance with ESA 2010. They are a significant tool for analysing financial developments and policy decisions, and provide key statistical information on financial transactions, other financial flows, and financial balance sheets by institutional sector, including non-financial corporations. Particular issues relating to the non-financial corporations sector include the indebtedness of the sector, its debt servicing burden and its impact on access to external finance as well as its capacity to withstand economic shocks. Indeed, since the global financial and economic crisis, financial accounts for non-financial corporations have been integrated into an enlarged set of policy indicators that are used to monitor private sector debt as part of the macroeconomic imbalance procedure (MIP) surveillance mechanism.

Financial accounts show how borrowers obtain resources by incurring liabilities or reducing assets, and how lenders allocate their surpluses by acquiring assets or reducing liabilities. The types of assets and liabilities that non-financial corporations hold carry different levels of risk and can be used to assess financial risk, vulnerability and welfare.

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