A disaggregated analysis of recent developments in lending to corporations

The strong expansion in lending in the years prior to the financial crisis led the aggregate debt of non-financial corporations to rise to a very high level, far exceeding the figures, in terms of GDP, of other economies such as those in the euro area, the United Kingdom and the United States. Since 2009, the debt of this sector has moved on a declining path. Bank lending by resident institutions, which is the main means of financing of these corporations, especially smaller-sized firms, has since shrunk by 23% to April 2014. However, this aggregate information masks differentiated behaviour within the sector which is relevant for understanding how the necessary process of corporate deleveraging is taking place. This article analyses itemised information from companies in order to study the degree of heterogeneity in recent developments in respect of bank lending to companies. To do this it divides the sample of companies into two groups, depending on whether credit flow has been positive (or zero) or negative, and the differences in the behaviour of the main economic and financial variables between both groups of companies are investigated. In this connection, three Banco de Espana databases are used: the Central Credit Register (CCR), which offers information on bank lending at each company, and those of the Central Balance Sheet Data Office (CB), which enable economic and financial developments at the corporations to be analysed. The combination of these databases results in a sample that contains around 400,000 companies on average each year, giving it a high degree of representativeness. Following this introduction, the next section analyses to what extent the reduction in recent years in the debt of non-financial corporations as a whole has been compatible with the existence of a notable proportion of companies where bank lending has continued to grow (or held stable). The following two sections then compare, respectively, the activity and financial position of the two groups of companies into which the sample has been divided. There follows a presentation of the results obtained from estimating a simple model in which the impact the corporation’s economic and financial position has on the likelihood of its increasing (or maintaining) its volume of loans is analysed. Finally, the main conclusions are drawn.