Synopsis of the Determinants of the Choice of a Financial Structure of French Industrial and Commercial Groups

Abstract

Belonging to a group modifies the financing conditions of the firms concerned. Thus, we observe that the conditions of access to the financial markets are modified by the very fact of belonging to a group whose financial surface is the most easily identifiable; the interest rates on the loans themselves are less high for these companies. Their dependence on the banking system also appears to be less clear-cut, as the group's head company is able to pass on loans negotiated on favourable terms to certain units within the group. With regard to the level of debt alone, there is often reference to a higher level of debt in groups, based on the chain accounting of the same asset, first as fixed assets and then as equity securities. This last point raises the question of the choice of relevant levels of aggregation for measuring financial variables. Until now, most studies have been based on data from the company accounts. However, the consolidated financial statements provide a better assessment of the financial situation of these groups, in particular by eliminating fully or proportionally consolidated investments. In order to gain a better understanding of the level of indebtedness of a group, it is more appropriate to use the consolidated financial statements to eliminate cross-financing for companies included in the scope of consolidation. Using such data, we can observe real divergences with the results of studies on corporate accounts, which show more favorable borrowing conditions, slightly lower levels of debt and a clear decrease in the use of borrowing in the financing resources for the period 2017-2020, with a domination of self-financing. These divergences can also be observed when comparing the debt levels of companies in different countries where the practice of consolidation is more or less widespread. The main objective of this article is to present the results, obtained from a sample of consolidated accounts of French industrial and commercial groups, of a modeling of debt levels put in perspective with modern financial theory, in that it proposes conceptual candidates explaining current developments.