Franco Varetto

WP 23/14; The financial crisis has emphasized the importance of the credit crunch in constraining the financing of the firms. The debt capacity from banks is defined as the maximum amount of debt that the banks are available to grant to companies. Using annual report's data and information from Centrale dei Rischi of Bank of Italy on a set of 321 industrial firms some econometric models on bank overdrafts have been estimated. Applying the models estimated on 2009 data to 2011 data has been obtained an appraisal of the credit crunch between 14% and 15% of the total bank lending to these companie

We would like to thank the European Commission for the translation of this study and Annie SAUVÉ and Maud SAVARY for their very useful comments. CONTENTS INTRODUCTION.................................................................................................................2 1. COMPANY NET EQUITY: THEORETICAL ASPECTS..................................................5 1.1. The need for equity.............................................................................................5 1.2. The cost of equity...............................................................................................5

Starting from a map of financial ratios organized to analyse the corporate profitability, here is proposed a closed formula approach to compute the averages of ratios and their variabilities over the whole map. An application is provided using the 2016 edition of Mediobanca’s Dati Cumulativi. The proposed approach is easily generalizable and could be use in the domain of risk analysis of non-financial companies.

The financial crisis has emphasized the importance of the credit crunch in constraining the financing of the firms. The debt capacity from banks is defined as the maximum amount of debt that the banks are available to grant to companies. Using annual report’s data and information from Centrale dei Rischi of Bank of Italy on a set of 321 industrial firms some econometric models on bank overdrafts have been estimated. Applying the models estimated on 2009 data to 2011 data has been obtained an appraisal of the credit crunch between 14% and 15% of the total bank lending to these companies.

The financial crisis had a severe impact on financial statements of Italian manufacturing companies: in 2012 total revenues are still under the level got before 2009, while gross margins (EBITDA) are even below the level of 2007. The decrease of the accounting depreciation rates allowed the companies to contain the fall of net margins (EBIT). The cutback of fixed investments and the slow dynamic of the operating working capital have allowed the companies to limit their external financial needs, whose coverage came mainly from bond issues and net increases of short term financial debts. Length: 33 pages Keywords : Crisi finanziaria, Imprese manifatturiere, Bilanci, Struttura finanziaria, Credit crunch, Redditivita, Fabbisogni finanziari

The introduction of risk in the microeconomic theory has some important effects on the behavior of the competitive firms: the level of optimal production under condition of risk is lower than under certainty; the optimal mix of productive input shifts to ones with less uncertainty; vertical integration, diversification and hedging are as many responses for optimal management of risks. The conclusions of the microeconomics under uncertainty depend also from the way the risk is modeled: additive risk is easier to handle than multiplicative risk, and conclusions from that are closer to microeconomics under certainty.

ABSTRACT Throughout the Member States of the European Union, economic policy debate has centered on the terms of corporate financing, and in particular on whether the companies of each country have sufficient equity to compete in a single market. Moreover, faced with the risk of corporate insolvency, credit institutions consider a certain equity level to be one of several indicators of creditworthiness. Given this situation and within the framework of the work of the European Committee of Central Balance Sheet Offices, Germany, Austria, Spain, France and Italy and the second General Directorate of the European Commission invited a working group to compare the financial autonomy of European industrial companies. This study covered the period 1991 to 1993 and examined several issues. Do corporate equity levels vary according to the country? Do these levels vary according to company size, regardless of the country? Do small companies have a specific position in each country? This study is based on an evaluation of corporate solvency, given that equity is used by companies and their financial partners to control risk exposure. After a brief reminder of the role of equity, the study sums up the research conducted since the publication in 1958 of the paper by Modigliani and Miller and gives a critical analysis of the empirical findings of international comparisons. All such research must begin by identifying and solving the financial and statistical methodological problems inherent to comparisons of the financing conditions of different countries. The work conducted gives rise to clear conclusions. More specifically, in terms of the weighted mean, net equity levels are fairly similar in Austria, Spain, France and Germany, and only Italy appears to be under-capitalized. The median, however, divides the countries into two groups, with France and Spain showing high net equity/financial resources ratios, and Italy and Germany low ratios. Analysis of the situation of Austrian companies is far from straightforward on account of the under-representation of small companies, which overvalues the median in view of the under-capitalization of this group of companies. - Corporate equity levels vary from country to country. These differences are at least partially related to variations in taxation, bankruptcy regulations, the organization of the banking system, the relationship between banks and companies and the financing practices of each country. - An overall analysis is insufficient and must be complemented by an analysis by company size. - The situation of the companies in each country can not be evaluated without taking into account financial requirements. - In France, regardless of the size of the company, the share of equity in overall financial resources appears larger than in other countries. Moreover, the difference between the equity of small and medium-sized companies and that of large corporations is narrower than in Germany or Austria. It should also be noted that this company classification is relatively recent in France. In the early 1980s, small and medium-sized companies enjoyed a stronger financial position than large corporations. Subsequently, ebbing inflation, rising profits and expanding capital markets enabled large corporations to improve their financial structures significantly. At the beginning of the 1990s, all companies were affected by the economic downturn, with the notable exception of large French corporations, which continued to strengthen their financial structures. The low debt-to-net turnover ratio in France is due to high equity levels, as well as low borrowing requirements related to high asset turnover rates, which may be attributable to lower operating capital requirements and perhaps relatively weak fixed asset formation during the period under review. In view of the conference on 10 October 1997 in Paris, the study group calculated the ratios for 1995. The results were consistent whith those of 1991-1993. On the whole, the country classification resulting from the different ratios was confirmed. There is nevertheless an overall improvement in the various indicators of autonomy and activity, in particular in Spain.

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Throughout the Member States of the European Union, economic policy debate has centred on the terms of corporate financing, and in particular on whether the companies of each country have sufficient equity to compete in a single market. Moreover, faced with the risk of ...

The international regulation on banking developed by Basel Committee on Banking Supervision has set a simplified link between default probabilities and loss given default, avoiding to introduce the correlation. The scientific literature ha proposed many models that try to improve the Basel framework. This article examines the most important models proposed in the literature and apply two of them to aggregate data from the Bank of Italy.