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The economic and financial situation of Italian non financial corporations: an international comparison

By Antonio De Socio

Abstract

The paper analyses the main differences in the financial structure of Italian and European non financial corporations in the 2004-2007 period, that is during the years before the financial crisis. The research is based on individual balance sheets of Amadeus (Analyse Major Databases from European Sources) database, which allow to isolate the effects of the different sectional and dimensional composition on the differences of the balance sheets ratios and to identify the more fragile firms. Italian non financial corporations present many factors of weakness compared to European ones. Firstly they are characterised by a lower operating income, even if in the period under analysis they obtained a slightly higher increase in turnover. Secondly a high indebtedness, with respect both to turnover and to risk capital, gives rise to a bigger impact of interest payments. Moreover the weight of short-term debt for Italian firms is higher and the availability of liquid assets is lower. Finally the percentage of commercial debt on assets is quite high. Taking all into account, the financial fragility is confirmed by the higher share of Italian firms which are vulnerable compared to European average.profitability, indebtedness, financial structure

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