OECD Business and Finance Outlook 2016

image of OECD Business and Finance Outlook 2016

It is seven years since the global crisis and despite easy monetary policy, financial regulatory reform, and G20 resolutions favouring structural measures, the world economy is not making a lot of progress. Indeed, the responses to the crisis seem mainly to have stopped the banks from failing and then pushed the many faces of the crisis around between regions—currently taking the form of excess capacity in emerging markets. Productivity growth raises income per head, allows companies to pay better wages and it raises demand to help to eliminate excess capacity and improve employment. However, this element is missing in the global corporate sector. The theme of this year’s Business and Finance Outlook is fragmentation: the inconsistent structures, policies, rules, laws and industry practices that appear to be blocking business efficiency and productivity growth.


Corporate finance and productivity

One of the puzzles of the post-crisis period is low observed aggregate productivity growth. This chapter dissects the problem using the company and sector value-added data of more than 11 000 of the world’s largest listed non-financial and non-real-estate companies, taken from 20 different industry sectors of the Global Industry Classification Standard. The contribution to productivity growth of these companies is very narrowly based within each sector. This chapter explores why productivity growth is fragmented, i.e. highly varied across enterprises. It considers what distinguishes “more” from “less” productive companies and examines the effect of different company financial decisions with respect to capital expenditure, sales, dividend and buy-back policies, research and development expensing, debt-versus-equity, and merger and acquisition activity.




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