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The rise of corporate net lending among G7 countries: a firm-level analysis

By Davide Villani


PKES Working Paper 1919

October 2019

In recent decades, corporate net lending has been increasing in several developed countries. This paper discusses the impact of financialisation and income distribution on the level of corporate net lending among G7 countries. We argue that financialisation affects the level of corporate net lending through firms' re-organisation towards a model of accumulation based on the maximisation of “shareholder value” and through the negative impact on investment. Moreover, the reduction in the wage share can increase the capacity of accumulation of liquidity of corporations, increasing the gap between corporate savings and investment, leading to the rise in net lending. We test our hypotheses using panel data of publicly listed non-financial corporations for the period 1990-2015. According to our findings, the process of financialisation has a positive impact on the level of net lending after 2001, while the wage share at the firm-level has a strong negative impact on the level of net lending throughout the whole period.

Keywords: Net lending, Financialisation, Functional income distribution, Firm-level analysis

JEL classification: E21 G30 O16