The indebtedness of Spanish non-financial companies fell between 2007 and 2024 to historically low levels. In medium-sized companies, leverage dropped from 47% to 7% in three years.
Between 2007 and 2024, the indebtedness of non-financial companies in Spain has notably decreased to historically low levels, according to diariosigloxxi.com based on an analysis by the Bank of Spain published this Wednesday.
The document, titled "The deleveraging process of Spanish non-financial companies in the period 2007-2024", identifies for each company its maximum leverage level, known as the peak, and the subsequent minimum, or trough. The entity detects a notable heterogeneity among companies.
In medium-sized companies, leverage drops from 47% to 7% in three years, from the peak to the subsequent trough. 31% of companies reach the trough without debt, and 54% have more liquidity than indebtedness.
The Bank of Spain notes that the adjustment is accompanied by more liquidity and profitability, and less investment. The reduction is greater in smaller companies, younger ones, and those that had more credit risk at the peak, and a reconfiguration of liabilities is also observed among companies with fewer restrictions on bank credit.
"Although the analysis does not allow distinguishing between demand and supply factors of credit, this result suggests that the deleveraging process is not driven solely by credit supply constraints, but also reflects proactive business decisions."
According to the Bank of Spain, deleveraging is more intense in SMEs and in companies with higher risk at the peak. The intensity decreases with age and is relatively more pronounced in the energy, information and communications, and trade and hospitality sectors.
The main mechanism for reducing leverage is debt repayment. Equity plays a more significant role in larger, more solvent, and younger companies, which significantly increase their capital.
The entity considers it "relevant" to study in future research how this greater financial flexibility translates into productive investment, access to credit conditions, and resilience to economic disturbances.
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