The corporate self-financing rate: A crucial variable in the aftermath of the crisis

- "The crisis has led companies to self-finance their investments: in the aftermath of the Lehman bankruptcy, they lost access to credit and the financial markets seized up, which showed them the danger of financing investments by running up debt."
- "In several countries (United States, United Kingdom, Germany), the selffinancing rate (cash-flow-to-investment ratio) already exceeds 100%. In the countries where this is not yet the case (France, Spain, Italy), we should expect either a drive among companies to increase productivity (and hence job losses), a slowdown in wages, or a decline in investment. This is already happening in Spain and Italy, but not yet in France."
- "A requirement that the self-financing rate should exceed 100% will lead to a permanent fall in the corporate debt ratio, a fall in companies’ return on equity, more unfavourable income sharing for wage earners and a fall in demand."

Natixis Flash Economics 427 20100831

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