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Comparison of the results obtained using capital stock and equity

Thursday 26 May 2011, by Rose Blackburry

There are more companies for which both employment and equity rather than employment and capital stock. This difference is even more important in the United Kingdom, where, from 1996, the reporting companies increased twofold when equity rather than capital stock is considered.

UK firms with equity exceeding € 100 000 at their creation have an employment level growing less quickly than companies having a capital stock exceeding this threshold (while having a growth rate about two times faster than in France ). In France, there is no difference.

UK firms with equity exceeding € 100 000 at their creation are, on average, smaller than those with a capital stock over € 100 000 This bias is partly due to the fact that companies with a turnover less than £ 11.2 million are not required to publish their entire balance sheet and, therefore, their capital stock is not known.

Both in France and in the UK, changes in equity during the years following the creation is greater than changes in capital stock, which is explained by the fact that equity includes both increases in capital stock but also company earnings.

The fact that the average equity seems lower than the average capital stock is not significant: more companies are considered for this calculation and those that were added are smaller. As the average is a highly volatile indicator, some values are sufficient to make it vary significantly.

In France and in the UK, the average equity by company and by employee are similar to average capital stock by company and by employee at the creation, which is logical.

For companies with equity lower than one million Euros, the average equity per employee at the firm birth is about 1.5 times higher in France than in the United Kingdom.

In the United Kingdom, companies with the highest equity level at their creation are the one with the highest growing employment rate. This phenomenon is not observed in France. When we consider the capital stock rather than equity, this phenomenon is visible in France but not in the United Kingdom.

Moreover, both in France and in the UK, companies increasing the most their capital stock or their equity are also the one with the highest employment growth.

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