Spanish firms cut median debt ratio from 47 to 7 percent
Spanish non-financial firms reduced median debt-to-assets ratios from 47 to 7 percent between firm-specific peaks and troughs during 2007-2024. Daniel Dejuan-Bitria documents the adjustment in a Bank of Spain paper published October 14, 2026.
Three years to reduce debt
The median firm's peak-to-trough adjustment takes three years; 31 percent finish debt-free and 54 percent hold cash exceeding debt.
Repayment of bank and non-bank debt drives the reduction, with equity growth playing a smaller role.
Smaller, younger and riskier firms reduce leverage more intensively.
Firms with default probabilities above 3 percent cut debt ratios by 34 percentage points more than those below 1 percent.
Cash-to-assets ratios rise from about 5 to 8 percent, while the share investing falls from 62 to 46 percent.
Tangible assets decline from 28 to 19 percent of assets.
Firms receiving new bank credit also deleverage, which the author interprets as evidence consistent with proactive financial management.
Tracking each firm's largest correction
The final sample contains 997,718 firms and 9,591,328 observations from the central bank's Integrated Central Balance Sheet Database.
The method extends DeAngelo, Gonçalves and Stulz (2018), tracking each firm's maximum leverage to its subsequent minimum.
It measures the largest observed correction, not annual debt dynamics.
Peaks cluster in 2008 and 2020 but occur throughout the period.
Robustness tests retain the main patterns, although sample exits and the observation window affect measured adjustment.
More liquidity, less investment
The author links lower debt and higher liquidity to greater financial flexibility.
This rebuilding of buffers accompanies weaker investment, particularly among smaller firms.
The descriptive design cannot separate credit supply restrictions from firms' financing choices.