Annals of Finance

, Volume 7, Issue 1, pp 95–118

Corporate debt and financial balance sheet adjustment: a comparison of the United States, the United Kingdom, France and Germany

Research Article

DOI: 10.1007/s10436-010-0146-6

Cite this article as:
Gibbard, P. & Stevens, I. Ann Finance (2011) 7: 95. doi:10.1007/s10436-010-0146-6


The level of UK corporate debt directly affects financial stability in the United Kingdom because a significant amount of the exposure of the UK financial system is to UK corporates. Our paper provides a comparison of the determinants of corporate debt in the United States, the United Kingdom, France and Germany. The comparison serves to benchmark our findings about the determinants of UK corporate debt. In addition, the UK financial sector is significantly exposed to the corporate sectors in the United States, Germany and France. The model assesses the contribution of investment, acquisitions, cash flows and market-to-book values to the determination of debt, and also the tendency of debt to revert to its optimum level. Debt was found to be positively related to the financing needs of the firm, and the optimum level of debt to be negatively related to the market-to-book ratio. This casts some light on the procyclicality of debt.


Capital structureCorporate debtBalance sheetGearingPanel data

JEL Classification


Copyright information

© Bank of England 2010

Authors and Affiliations

  1. 1.The University of SydneySydneyAustralia
  2. 2.Centre for Central Banking StudiesBank of EnglandLondonUK