The Financial and Real Performance of Non-Financial Corporations in the Euro Area: 1999-2015

This paper documents the aggregated performance of non-financial corporations in the largest euro area economies and compares it with the performance of the US corporate sector as reported by National Economic Accounts and Financial Accounts. We find significant cross-country structural differences in the behaviour of real and financial indicators that remain long after the creation of the single currency, although there has been convergence in the average cost of debt paid by corporations and in the deleveraging process unfolding after the financial crisis. German corporations stand out, with higher productivity of operating capital and profit margins. Moreover, a lower average cost of debt and also a lower average corporate tax rate have contributed to a higher return of equity in Germany compared with the return in other EU countries and the US. Since the crisis years, German and Spanish companies have joined the US corporations in saving more than they invest. We also find some evidence of a declining proportion of cash-flows allocated to capital investment.