Firm-Level Evidence for Convergence and Divergence Trends 1
Chart 4: The Predicted Relationship between Leverage and Shareholder Concentration of Corporations in the EU-15
Source: Authors’ calculations.
0 0.05 0.1 0.15 0.2 0.25 0.3 0.35
0 20 40 60 80 100
Predicted Leverage
Table 1: Size of Capital Markets
Source: IMF, IFS. Data are for 2003.
Country
Bank deposits to GDP
Stock market capitalization to GDP
Private bond market cap. to GDP
Public bond market cap.
to GDP
Austria 0.8086 0.1441 0.3137 0.3173 Belgium 0.7339 0.575 0.485 10.096 Denmark 0.5246 0.4437 10.459 0.5536 Finland 0.5039 0.8681 0.2964 0.2822 France 0.6056 0.5583 0.46 0.3829 Germany 0.736 0.3682 0.4937 0.2769 Greece 0.6097 0.4531 0.0204 0.7118 Ireland 0.606 0.6072 0.0709 0.3304 Italy 0.535 0.3179 0.336 0.9027 Netherlands 0.8336 0.9596 0.369 0.453 Portugal 0.8763 0.3009 0.1729 0.402 Spain 0.6748 0.5026 0.1696 0.419 Sweden 0.4006 0.8313 0.4844 0.4384 United Kingdom 0.8631 12.997 0.156 0.2993
EU-15 0.6612 0.5873 0.3481 0.4842
Bulgaria 0.3702 0.0445
Croatia 0.3819 0.1493
Czech Republic 0.5785 0.2114 0.0412 0.2234
Estonia 0.2304 0.2937
Hungary 0.375 0.1657 0.0149 0.2651
Latvia 0.1829 0.0627
Lithuania 0.158 0.124
Poland 0.2876 0.0999 0 0.2819
Romania 0.1907 0.0384
Slovak Republic 0.5359 0.062 0 0.1198
Slovenia 0.3634 0.1217
CEE-Total 0.3293 0.122 0.014 0.2225
Developing -
Total 0.4854 0.6461 0.074 0.1888 Japan 10.598 0.7305 0.4409 0.6913 United States 0.5602 10.791 0.9049 0.5135
Table 2: Debt Ratios
Country
Long-term debt ratio
Short-term debt ratio
Total debt ratio
Austria 0.2632 0.3139 0.5771
Belgium 0.2227 0.3283 0.551
Denmark 0.2012 0.3238 0.525
Finland 0.2087 0.3112 0.5199
France 0.3015 0.3904 0.692
Germany 0.3813 0.3031 0.6844
Greece 0.203 0.3834 0.5863
Ireland 0.1412 0.3204 0.4616
Italy 0.2841 0.3686 0.6526
Netherlands 0.2577 0.3495 0.6072
Portugal 0.3373 0.3978 0.7351
Spain 0.2536 0.3479 0.6016
Sweden 0.2619 0.2982 0.5601
United Kingdom 0.3407 0.3358 0.6765
EU-15 0.2646 0.3427 0.6073
Bulgaria 0.1574 0.3407 0.4981
Croatia 0.1697 0.2656 0.4353
Czech Republic 0.0941 0.2934 0.3875
Estonia 0.0645 0.3029 0.3674
Hungary 0.0603 0.3152 0.3756
Latvia 0.0888 0.1847 0.2735
Lithuania 0.1655 0.2373 0.4019
Poland 0.0957 0.4821 0.5805
Romania 0.0512 0.3393 0.3905
Slovak Republic 0.0958 0.3489 0.4447
Slovenia 0.0536 0.2755 0.329
CEE-Total 0.1029 0.3043 0.4074
Developing-Total 0.2221 0.2968 0.5191
Japan 0.2975 0.3908 0.6883
United States 0.4209 0.2079 0.6288
Source: OSIRIS database. Data are for 2003. The long term-debt is defined as the ratio of the long-term debt to total assets. The short-long-term debt is measured as the ratio of the short-long-term debt to total assets. Total debt is the ratio of the sum of the long-term and short-term debt divided by total assets.
Table 3: Debt Ratios by Years
Region 2001 2002 2003 2004 Total
EU-15
Long-term debt 0.2638 0.2677 0.2767 0.2646
Short-term debt 0.3472 0.3353 0.3353 0.3427
Total debt 0.611 0.603 0.612 0.6073
CEE
Long-term debt 0.0908 0.0983 0.113 0.1104 0.1029 Short-term debt 0.3207 0.2989 0.2982 0.3011 0.3043
Total debt 0.4112 0.3978 0.4112 0.4116 0.4074
Developing
Long-term debt 0.2191 0.239 0.211 0.2221
Short-term debt 0.291 0.2952 0.3026 0.2968
Total debt 0.5111 0.5341 0.5135 0.5191
United States
Long-term debt 0.4549 0.4979 0.4741 0.4209
Short-term debt 0.2191 0.203 0.1897 0.2079
Total debt 0.674 0.7009 0.6638 0.6288
Japan
Long-term debt 0.2977 0.3052 0.2897 0.2975
Short-term debt 0.395 0.3962 0.381 0.3908
Total debt 0.6927 0.7013 0.6707 0.6883
Source: OSIRIS database.
Long-term debt Lending rate Tax_rate Bank deposits/GDPCPI Real GDP growth
Index of institut- iona quality U region ng-term debt 1 Lending rate -0.5212 1 0 rate 0.6309-0.3993 1 0.00220.0656 ank deposits/GDP0.699 -0.3015 0.63561 0 0 0.0008 flation rate -0.3639 0.5734-0.0882 -0.1214 1 0.00130 0.682 0.0743 eal GDP growth -0.4479 0.2481-0.8419 -0.4792 0.10641 00010.01840 0 0.2919 dex of stitutional quality 0.5744-0.4243 0.46850.5608-0.1897 -0.4116 0 0.021 0 0.00430 re price change -0.3121 0.3354-0.463-0.3593 0.20970.4324-0 009 0 0.03 0 0.00240
Table 4 continued: Correlation Matrix Long-term debt Lending rate Tax_rate Bank deposits/GDPCPI Real GDP growth
Index of institut- iona quality EU-15 Long-term debt 1 Lending rate -0.0511 1 0.781 Tax rate 0.54540.27571 0.06660.362 Bank deposits/GDP 0.4746 -0.2162 0.21671 0.003 0.02460.4568 Inflation rate 0.03190.3796-0.3448 0.20541 0.85110 0.22730.0256 Real GDP growth -0.3128 0.1416-0.8063 -0.0815 0.59911 0.05950.32680.00050.55060 Index of institutional quality -0.1929 -0.3911 -0.2835 -0.0451 -0.4229 -0.1098 0.25270 0.32610.52620 0.4206 Share price change 0.10940.35860.1876-0.0750.12670.1082-0 0.51920.00010.52060.29090.15740.4273
Long-term debt Lending rate Tax_rate Bank deposits/GDPCPI Real GDP growth
Index of institutio nal quality ng-term debt 1 ding rate -0.0362 1 8341 e -0.4744 -0.05 1 197 0.8983 k posits/GDP -0.0305 -0.0222 0.51551 856 0.83550.1273 flation rate -0.3858 0.592 0.1587-0.0635 1 01670 0.66150.5324 owth 0.2768 -0.3363 -0.6733 -0.4654 -0.2517 1 09250.03380.03280.00150.0993 dex of stitutional ality -0.4173 -0.2397 0.17080.1569-0.1983 0.0571 00910.02290.637 0.06710.04910.7127 re price ge 0.22170.1788-0.5985 -0.1925 0.17020.469 -0 22260.13290.117 0.04110.12880.00390. Note: For data sources and definitions of the variables, see Section 3.
Table 5: Institutional Influences on Leverage
The table presents the coefficients of a regression equation estimated for the full sample of EU-15 and new member state companies, and for separate samples of EU-15 and new member state companies. The dependent variable is the long-term debt to total assets ratio. The independent variables are as follows. Institutional quality is measured as the sum of six measures: (1) Voice and Accountability, (2) Political Stability, (3) Government Effectiveness, (4) Regulatory, (4) Quality, (5) Rule of Law, and (6) Control of Corruption. The indicators are constructed using an unobserved components methodology described in detail in Kaufmann, Kraay and Mastruzzi (2005). Bank deposits/GDP is the ratio of bank deposits to GDP.
Lending rate is the average country annual lending rate. Tax rate is measured by the tax rates compiled by the KPMG’s annual survey of corporate tax rates (KPMG, 2003). The absolute values of the t-statistics are under the coefficients.
Full
Sample EU-15 NMS Full
Sample EU-15 NMS Institutional
quality 0.006 -0.039 -0.146
0.12 -0.64 -6.48
Bank
deposits/GDP 0.176 0.089 0.299
2.34 1.08 1.50
Lending rate -0.015 -0.022 0.000 -0.011 -0.013 -0.006
-1.59 -1.39 -0.07 -1.76 -0.97 -0.68
Tax rate 0.006 0.006 -0.001 0.003 0.005 -0.009
2.39 2.19 -0.64 1.14 2.03 -2.06
Observations 20 11 9 20 11 9
Adj-R-Sq. 0.46 0.22 0.87 0.59 0.30 0.19
Source: Authors’ calculations.
Table 6: Ownership Categories and Leverage
This table presents comparisons of long-term debt levels as a fraction of total assets across direct ownership categories. We define a company as state-owned, if the largest direct shareholdings are held by the state and are at least 20%. Other types of ownership are defined similarly. Dispersed companies are those with no shareholder holding 20% of the outstanding shares. The comparisons are based on the means of the long-term debt ratio. For example, the state owned firms in the old member states (EU-15) have a 34.1% long-term debt ratio, whereas the same ratio is 27.7% for all other types of firms in the EU-15. The signs between the two means indicate the statistical significance of the debt levels (>: significantly greater at the 5% or better, <: significantly smaller at the 5% or better, and ≈:
insignificantly different at the 5% significance level or better).
EU 15 NMS
State 0.341 > 0.277 0.237 > 0.141
Financial 0.292 ≈ 0.277 0.105 ≈ 0.144
Family 0.235 < 0.284 0.164 ≈ 0.147
Corporations 0.279 ≈ 0.276 0.145 ≈ 0.140
Mutual
Funds 0.302 > 0.277 0.152 ≈ 0.142
Dispersed 0.283 ≈ 0.275 0.097 < 0.150
Source: Authors’ calculations.
Table 7: Summary Statistics by Country in the EU-15 and NMS Samples ROA Size Tangibility Sales growth SH1 Country MeanSD Mean SD MeanSD MeanSD Mean Austria 0.0460.09512.8691.716 0.3480.2120.2030.24350.01 Belgium 0.0480.07512.5521.499 0.3270.2620.2260.30245.19 Denmark 0.0340.11712.2511.458 0.3260.1810.1680.41926.91 Finland 0.0360.11312.3551.813 0.3090.2080.2760.38130.00 France 0.0620.04215.3191.091 0.2250.1630.1930.15744.77 Germany 0.0630.05914.8741.111 0.2940.1670.2230.52646.11 Greece 0.0730.06212.2181.244 0.3130.1800.2960.42742.54 Ireland 0.1261.36811.8971.972 0.2850.2520.2890.64719.51 Italy 0.0470.05614.0851.126 0.2750.1950.2780.30540.52 Netherlands0.0470.08313.8381.437 0.2360.1860.1590.24427.81 Portugal 0.0100.09712.7561.723 0.3210.1780.1730.17639.72 Spain 0.0640.05113.5771.563 0.3560.2040.4111.40229.33 Sweden 0.0320.11613.1711.558 0.2550.2000.2070.23127.30 United Kingdom0.0730.06715.4720.456 0.3460.2750.1610.24611.51 EU-15 0.0520.28213.5201.812 0.2960.2090.2070.27134.36
mary Statistics by Country in the EU-15 and NMS Samples ROA Size Tangibility Sales growth SH1 y MeanSD Mean SD MeanSD MeanSD Mean SD 60.0729.682 0.904 0.5090.1900.2070.50163.620 70.06311.0610.913 0.5630.2550.2030.36054.842 0.0440.09512.1591.202 0.5620.2110.1490.34858.26332.305 00.08810.3010.505 0.3010.2180.2630.24454.19923.5 y 0.0520.07311.7681.720 0.4310.1850.2640.89334.26126.7 20.1269.929 1.414 0.5470.1720.1890.53551.34718.5 40.06310.8771.274 0.5980.1830.4280.88559.97324.6 30.06211.2180.898 0.3680.1940.1380.41737.11820.4 mania 0.0710.0949.985 1.122 0.5050.1420.2500.44460.26524.7 40.0599.085 1.275 0.5230.1790.2290.27354.01723.9 80.04110.7841.189 0.4730.1360.2410.22436.96332.4 0.0400.07310.4841.428 0.4990.2070.2140.45552.79526.9 NMS0.0480.22812.3862.230 0.3710.2300.2080.36639.47 25.8 thors’ calculations.
Table 8: The Determinants of Leverage in the EU-15 and the New Member States
The table presents the coefficients of a regression equation estimated for the full sample of EU-15 and new member state companies, and for separate samples of EU-15 and new member state companies. The dependent variable is the long-term debt to total assets ratio. The independent variables are defined as follows: ROA is the return on assets, defined as the ratio of earnings before interest and taxes to total assets. Size is the (natural) logarithm of total assets. Tangibility is the ratio of total fixed assets to total assets. Sales growth is the percentage change in sales.
All equations include a full set of time, industry and country dummies. The absolute values of the t-statistics are under the coefficients.
Full Sample EU-15 NMS
ROA -0.135 -0.167 -0.152
(4.55) (4.59) (2.89)
Size 0.034 0.039 0.009
(17.24) (17.16) (2.32)
Tangibility 0.132 0.181 0.028
(9.68) (10.55) (1.19)
Sales Growth -0.0002 -0.0002 -0.0035
(2.08) (2.18) (1.00)
Country dummies Yes Yes Yes
Time dummies Yes Yes Yes
Industry dummies Yes Yes Yes
Observations 2998 1874 1124
Adj- R-Sq 0.43 0.38 0.18
Source: Authors’ calculations.
wnership Identity e 9 presents the coefficient estimates of our basic model to explain the variation in the long-term debt to asset ratio panies under State ownership, Financial company ownership, Family ownership, Non-financial corporate ownership, M nd ownership and with dispersed ownership structures. For each ownership category, we report the results for the full sample (All), e sample of companies in the EU-15 countries (EU-15), and for the NMS. All equations include a full set of time and indu ies, with the exception of state owned companies in the NMS sample, where we drop the industry dummies due to the num degrees of freedom in such a small sample. The (absolute values) of the t-statistics are reported under the coefficients. The cut int for defining ownership identity is 20%.
Table 10: Non-Linear Impact of Shareholder Concentration Family Corporate EU-15 NM EU-15 NM OLS IV OLS IV OLS IV OLS IV SH1 0.0050.00440.0013 -0.001-0.0016-0.0027-0.0012 (2.88)(1.73)(0.63) (0.65)(1.84)(1.67)(0.89) SH1_2 -0.000054-0.00004-0.00001 0.000010.000010.000020.00001-0.000 (2.81)(1.50)(0.79) (0.43)(1.99)(1.67)(1.16) ROA -0.267-0.2300.256 0.056-0.340-0.253-0.328 (2.61)(2.41)(1.26) (0.21)(5.07)(3.14)(3-98) Size 0.0480.046-0.003 -0.00080.0380.042-0.0005-0.002 (8.88)(11.54)(0.23) (0.06)(11.76)(14.84)(0.07) Tangibility 0.2100.1520.283 0.2130.2440.287-0.049 (3.30)(2.95)(3.64) (3.79)(8.88)(11.07)(1.28) Sales Growth -0.009-0.016-0.008 0.014-0.0002-0.0003-0.008-0.001 (0.84)(2.67)(0.54) (0.85)(2.77)(11.54)(1.27) Obs. 239239136 136748748523 Adj. R-Sqd 0.410.3720.30 0.100.380.340.13 Source: Authors’ calculations.
Appendix Table 1A: Ownership Structure by Country and Region (the Fraction of Companies under the Six Ownership Categories in Each Country) Country State Financial Families Corporate Mutuals Dispersed Austria 7.55%3.77% 17.12%50.00%0.00% Belgium 0.00%17.28% 4.48%40.23%5.95% Denmark 1.51%2.26% 8.68%34.34%13.96% Finland 6.11%1.93% 14.24%31.19%3.54% France 0.58%4.09% 7.02%38.30%5.85% Germany 1.24%4.95% 15.10%40.87%2.48% Greece 0.00%2.13% 37.56%34.57%4.26% Ireland 0.00%0.00% 11.84%19.67%6.56% Italy 11.18%15.59% 7.54%45.29%0.88% Netherlands 2.45%7.36% 3.75%25.15%1.53% Portugal 0.00%8.79% 9.89%53.85%5.49% Spain 0.00%3.85% 6.59%49.18%1.10% Sweden 0.28%3.35% 18.31%28.77%13.41% United Kingdom0.00%3.14% 1.69%7.06%2.75% Total 2.19%6.21%10.59%35.70%4.95% Bulgaria 0.00%2.27% 9.92%84.42%0.00% Croatia 3.67%1.33% 18.90%49.00%12.00% Czech Republic 0.00%11.54% 0.00%57.69%11.54% Estonia 0.00%0.00% 33.33%66.67%0.00% Hungary 0.00%0.00% 0.00%42.86%14.29% Latvia 0.00%0.00% 26.67%63.64%0.00% Lithuania 0.00%6.45% 9.38%74.19%3.23% Poland 4.70%1.88% 20.49%42.01%3.76% Romania 2.33%4.65% 5.00%63.95%12.79% Slovak Republic 0.00%0.00% 0.00%100.00%0.00% Slovenia 0.00%0.00% 0.00%46.88%0.00% Total 1.90%2.85%9.92%60.80%5.64%
egression Results by Individual Countries in the EU-15 Sample AT BE DK FI FR DE GR IE IT NL PT ES SE A 0.146-0.304-0.094-0.071-0.801-0.636 -0.4230.350-0.3070.119-0.432-0.468-0.135 -2.01-0.86-0.83-2.64-3.66 -1.392.67-1.441.05-2.34-2.23-0.94 0.0320.0120.0120.0600.006 0.0660.0380.0440.0640.0830.0480.025 3.951.392.245.380.81 4.822.724.929.265.785.552.83 0.2330.1960.2450.2470.2760.300 -0.068-0.1460.3040.079-0.2000.2350.163 3.903.184.413.714.17 -0.48-1.004.961.26-1.793.842.01 rowth-0.076-0.0010.0250.0270.015-0.013 -0.0130.006-0.004-0.071-0.1110.0170.000 -1.341.131.300.21-0.90 -1.250.17-0.54-1.88-1.162.53-1.69 -0.248-0.024-0.012-0.6600.256 -0.555-0.235-0.408-0.642-0.625-0.458-0.120 -2.39-0.20-0.17-3.572.18 -3.30-1.34-3.13-6.51-3.31-3.95-0.98 155134155154167 926615818090169169 0.620.380.40.590.440.55 0.530.60.50.480.520.450.35
egression Results by Individual Countries in the NMS Sample BG HR CZEE HU LV LT PL RO SK SI -0.394-0.331-0.371-0.651-0.1170.087-0.0770.113-0.281-0.325 -2.04-1.76-3.43-1.54-0.620.75-0.260.79-1.56-2.24 0.0040.008-0.0060.4000.007-0.0550.019-0.0250.043-0.019 0.230.69-0.412.070.4-1.320.69-2.642.91-2.04 -0.1530.0610.2920.5330.412-0.303-0.0680.297-0.017-0.134 -2.021.073.431.231.9-1.32-0.426.1-0.13-2.19 -0.007-0.001-0.004-0.150-0.0020.012-0.0070.0080.0160.062 -0.71-0.12-0.16-1.81-0.150.37-0.240.660.51.99 0.2310.0600.032-4.062-0.1870.848-0.0270.257-0.3510.344 1.420.430.17-2.03-1.071.55-0.082.39-2.013.39 235182921722315816997146 0.070.440.350.790.270.510.090.290.100.15