Source
Source Contact person/organisation Contact person/organisationIn this dataset, almost all OECD countries compile their data according to 2008 System of National Account (SNA).
The link to the file "ANA_changes.xls" is available for users to provide more information on where OECD countries and non member countries stand regarding the change over the 2008 SNA.
The readers' guide gives general information on the dataset and withheld criteria for this dataset.
Data Characteristics Data Characteristics Other data characteristics Other data characteristicsFirms can finance their operations through debt or equity. The debt to equity ratio is a measure of the financial leverage, or the degree to which financial companies finance their activities out of their equity. The more debt financing a firm uses, the higher its financial leverage which in turn means higher interest payments and the greater the risk for corporations creditors and investors; therefore, high corporate leverage increases the vulnerability of financial corporations to shocks and may impair their repayment capacity.
A higher total debt-to-equity ratio indicates that the sector has been increasing the relative share of debt in external financing, whereas a lower debt-to-equity ratio indicates that the sector is financing a decreasing proportion of its activities through debt as compared to financing through their equity (retained earnings and net new share issuance).
Fluctuations in the market value of equity can also cause changes in the ratio. The ratio is the number of times debt is to equity. Therefore, if a financial corporation‘s ratio is 2.5 it means that the debt outstanding is 2.5 times larger than their equity.
Concepts & Classifications Concepts & Classifications Key statistical concept Key statistical conceptDefinition
The debt to equity ratio indicator is calculated by dividing the debt of financial corporations by the total amount of equity and investment fund shares on the liability side of the same sector.
Debt is a commonly used concept, defined as a specific subset of liabilities. All debt instruments are liabilities, but some liabilities such as equity and investment fund shares, and financial derivatives are not debt. Debt is predominantly obtained as the sum of the following liability categories: monetary gold and SDRs (AF1), currency and deposits (AF2), debt securities (AF3), loans (AF4), Insurance pension and standardised guarantees (AF6) and other accounts payable (AF8).
On the denominator side, equity and investment fund shares correspond to a part of the own resources of financial corporations which are, by convention, reported on the liability side of the companies. Own funds, which are calculated as total net worth plus equity and investment fund shares , would have been preferable as a denominator to avoid stock market fluctuations. However due to the non-availability of data on non-financial assets for many OECD countries, the total net worth could not be calculated. In this respect, equity and investment fund shares, which form a part of own funds, are selected as a denominator.
The financial corporation sector (S12) includes all private and public entities engaged in financial activities, such as monetary financial institutions (including the central bank), money market funds, non-money market funds investment funds, other financial intermediaries, financial auxiliaries, captive financial institutions and monetary lenders, insurance corporations, and pension funds.
Other manipulations Other manipulationsHigher debt can result in volatile earnings due to additional interest expense as well as increased vulnerability to business downturns. However, contrary to what many believe, debt is not necessarily a bad thing: it can be positive, provided it is used for productive purposes such as purchasing assets and improving processes to increase net profits. Moreover, the debt-to-equity ratio is more meaningful when compared over a period of time.
Non-consolidated debt data provide important information about the total indebtedness of the financial corporations sector.
Other Aspects Other Aspects Recommended uses and limitations Recommended uses and limitationsComparability
Data are non-consolidated for all OECD countries, except for Australia and Israel. According to SNA standards, a consolidated set of balance sheets for a sector is, first, an aggregation of all stocks, followed by the elimination of all stocks that represent relationships among units belonging to the same sector.
In this dataset, almost all OECD countries compile their data according to 2008 System of National Account (SNA).
The link to the file "ANA_changes.xls" is available for users to provide more information on where OECD countries and non member countries stand regarding the change over the 2008 SNA.
The readers' guide gives general information on the dataset and withheld criteria for this dataset.
Firms can finance their operations through debt or equity. The debt to equity ratio is a measure of the financial leverage, or the degree to which financial companies finance their activities out of their equity. The more debt financing a firm uses, the higher its financial leverage which in turn means higher interest payments and the greater the risk for corporations creditors and investors; therefore, high corporate leverage increases the vulnerability of financial corporations to shocks and may impair their repayment capacity.
A higher total debt-to-equity ratio indicates that the sector has been increasing the relative share of debt in external financing, whereas a lower debt-to-equity ratio indicates that the sector is financing a decreasing proportion of its activities through debt as compared to financing through their equity (retained earnings and net new share issuance).
Fluctuations in the market value of equity can also cause changes in the ratio. The ratio is the number of times debt is to equity. Therefore, if a financial corporation‘s ratio is 2.5 it means that the debt outstanding is 2.5 times larger than their equity.
Definition
The debt to equity ratio indicator is calculated by dividing the debt of financial corporations by the total amount of equity and investment fund shares on the liability side of the same sector.
Debt is a commonly used concept, defined as a specific subset of liabilities. All debt instruments are liabilities, but some liabilities such as equity and investment fund shares, and financial derivatives are not debt. Debt is predominantly obtained as the sum of the following liability categories: monetary gold and SDRs (AF1), currency and deposits (AF2), debt securities (AF3), loans (AF4), Insurance pension and standardised guarantees (AF6) and other accounts payable (AF8).
On the denominator side, equity and investment fund shares correspond to a part of the own resources of financial corporations which are, by convention, reported on the liability side of the companies. Own funds, which are calculated as total net worth plus equity and investment fund shares , would have been preferable as a denominator to avoid stock market fluctuations. However due to the non-availability of data on non-financial assets for many OECD countries, the total net worth could not be calculated. In this respect, equity and investment fund shares, which form a part of own funds, are selected as a denominator.
The financial corporation sector (S12) includes all private and public entities engaged in financial activities, such as monetary financial institutions (including the central bank), money market funds, non-money market funds investment funds, other financial intermediaries, financial auxiliaries, captive financial institutions and monetary lenders, insurance corporations, and pension funds.
Higher debt can result in volatile earnings due to additional interest expense as well as increased vulnerability to business downturns. However, contrary to what many believe, debt is not necessarily a bad thing: it can be positive, provided it is used for productive purposes such as purchasing assets and improving processes to increase net profits. Moreover, the debt-to-equity ratio is more meaningful when compared over a period of time.
Non-consolidated debt data provide important information about the total indebtedness of the financial corporations sector.
Comparability
Data are non-consolidated for all OECD countries, except for Australia and Israel. According to SNA standards, a consolidated set of balance sheets for a sector is, first, an aggregation of all stocks, followed by the elimination of all stocks that represent relationships among units belonging to the same sector.