Einar H. Dyvik
Research expert covering Nordics and global data for society, economy, and politics
Global corporate debt - Statistics & Facts
It is not always the case that companies can cover all their financial obligations with the liquid assets that they possess. Especially in a time of crisis this can be an issue, as the coronavirus (COVID-19) pandemic and the Russia-Ukraine war have shown. Companies need financial resources, among others, to cover the costs of running the business, fund their debts, modernize technologies, or to expand the activity to new products or markets. Especially large undertakings require huge financial injections and that is when the companies reach out for external financing.
Types of financing
Broadly speaking, there are two main types of corporate debt: loans and bonds. In case of a loan, a company borrows an agreed amount of money from a bank or other financial institution, with an agreed interest rate payable until the loan is fully repaid. In this sense corporate loans operate fundamentally in the same way as consumer loans. Importantly, loans cannot be openly traded on financial markets. Bonds can be thought of as a promise to repay a fixed amount of money on a certain date that is sold to investors. Once issued by a company, bonds can then be openly traded on financial markets. The date for repayment is called the maturity date, with the company making regular interest payments to the bond owner until then. Generally, the interest rate is lower for bonds than loans. While bonds are the most common financing instrument in the United States, in China and the Euro area, the overwhelming majority of corporate debt is in the form of loans. Loans also comprise most of the private sector debt in low and middle income countries.Value and quality of corporate debt
The growth of corporate debt levels since the Great Recession of 2009 is increasingly becoming a talking point among many analysts. The debt of global nonfinancial companies amounted to 90 trillion U.S. dollars in the first quarter of 2023, and exceeded the value of global GDP for the first time in 2020 following the outbreak of the COVID-19 pandemic. Around 45 percent of this debt was held by companies in emerging markets – a figure that has been steadily increasing over the past decades.
