The "savings gap" of European Corporations : a first look at the available data

While notable differences exist among countries and time periods, internal finance is the principal source of funds for the corporate sector in the main European economies. The importance of internal finance has been increasing through the mid 1990s, in coincidence with a slowdown in investment. Among the sources of external finance, loans are by far the most used, with medium-long term (MLT) loans being the most important component in France and Germany. Equity issues are a second sizable source. Bond issues are minimal. Analysis of yearly flows shows that the savings gap can vary normously over the business cycle. Compared to business cycle variation, differences in the savings gap across countries, company size or sectors are minor. Among listed companies, the smallest display the fastest growth and the highest savings gap. The largest companies rely almost entirely on internal finance.