Business finance in the United Kingdom and Germany

Quarterly Bulletin 1984 Q3
Published on 01 September 1984

This article examines the sources and structure of business finance in the United Kingdom and the Federal Republic of Germany.

Largely through historical and institutional circumstances, the present pattern of company sector liabilities in Germany differs fundamentally from that in the United Kingdom. Such differences reflect the traditional roles of the banks and the securities markets in the two countries, and the manner in which retirement pensions are funded. Nonetheless, the financial structure and institutional arrangements for corporate finance in the two countries have been converging for a number of years, and the relative importance of certain sources of new funds to companies in each country has in fact been strikingly similar for a decade or so. Capital gearing of German companies, however, remains generally much higher than is typical in the United Kingdom.

The narrow equity base of companies in both countries may, for various reasons, have been a constraint on their activities in the past. Factors affecting external equity finance are therefore examined, including constraints imposed by legal regulations on the form of business organisation and by discriminatory taxation. The article begins by comparing the financial systems in the two countries.

PDFBusiness finance in the United Kingdom and Germany


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