Return on equity (RoE) and return on physical capital (ROACE): What messages?

We look at, for OECD countries, trends in risk-free interest rates, in the return on equity ( RoE ), and in the return on physical capital (ROACE) since the late 1990s. We see that: The return on capital (ROACE) has increased, which may be linked to the skewing of income distribution at the expense of employees, and shows that the fall in the risk-free interest rate is not due to a fall in the return on capital ; The return on equity ( RoE ) is markedly higher than the return on physical capital (ROACE), which shows companies’ use of the leverage effect ( both in terms of borrowing and share buybacks); The return on physical capital (ROACE) and the return on equity ( RoE ) have not fallen in line with the fall in the risk-free interest rate, which shows companies’ refusal to correct the demand for return on equity, and indicates that the expansionary monetary policies have been ineffective .