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Capital Structure Determinants An Empirical Study of Swedish Companies

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  • Song, Han-Suck

    (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)

Abstract

This paper analysis the explanatory power of some of the theories that have been proposed in the literature to explain variations in capital structures across firms. In particular, this study investigates capital structure determinants of Swedish firms based on a panel data set from 1992 to 2000 comprising about 6000 companies. Swedish firms are on average very highly leveraged, and furthermore, short-term debt comprises a considerable part of Swedish firms’ total debt. An analysis of determinants of leverage based on total debt ratios may mask significant differences in the determinants of long and short-term forms of debt. Therefore, this paper studies determinants of total debt ratios as well as determinants of short-term and long-term debt ratios. The results indicate that most of the determinants of capital structure suggested by capital structure theories appear to be relevant for Swedish firms. But we also find significant differences in the determinants of long and short-term forms of debt. Due to data limitations, it was not possible decompose short-term debt and long-term debt into its elements, but the results suggest that future analysis of capital choice decisions should be based on a more detailed level.

Suggested Citation

  • Song, Han-Suck, 2005. "Capital Structure Determinants An Empirical Study of Swedish Companies," Working Paper Series in Economics and Institutions of Innovation 25, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    • Handle: RePEc:hhs:cesisp:0025
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    Cited by:

    1. E. Guo & O. Suliman, 2010. "Corporate operating characteristics and capital structure: causality testing in heterogeneous panel data," Applied Financial Economics, Taylor & Francis Journals, vol. 20(24), pages 1901-1922.
    2. Suratno & Syahril Djaddang & Imam Ghozali, 2017. "The Role of Business Risk and Non Debt Tax Shields to Debt to Equity Ratio on Pharmacy Listed Companies in Indonesia," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 73-80.
    3. Georgeta Vintilă & Ştefan Cristian Gherghina & Diana Alexandra Toader, 2019. "Exploring the Determinants of Financial Structure in the Technology Industry: Panel Data Evidence from the New York Stock Exchange Listed Companies," JRFM, MDPI, vol. 12(4), pages 1-16, October.
    4. Natasa Sarlija & Martina Harc, 2016. "Capital Structure Determinants of Small and Medium Enterprises in Croatia," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 14(3 (Fall)), pages 251-266.
    5. Maciej Stradomski & Katarzyna Schmidt, 2020. "Firm specific determinants of capital structure in European advanced developing countries," Bank i Kredyt, Narodowy Bank Polski, vol. 51(3), pages 263-292.
    6. Aulová, R. & Hlavsa, T., 2013. "Capital Structure of Agricultural Businesses and its Determinants," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 5(2), pages 1-14, June.
    7. Hlavsa, T. & Aulová, R., 2013. "Analysis of the Effect of Legal Form and Size Group on the Capital Structure of Agricultural Businesses of Legal Entities," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 5(4), pages 1-14, December.
    8. Jana Heckenbergerova & Irena Honkova, 2023. "Capital Structure Analysis – Theories and Determinants Validation Based on Evidence from the Czech Republic," E&M Economics and Management, Technical University of Liberec, Faculty of Economics, vol. 26(1), pages 145-164, March.
    9. Nur Ainna Ramli & Gilbert Nartea, 2017. "Interrelation between Economic Sectors, Capital Structure and A Firm's Financial Performance: The Indonesian Evidence," International Journal of Economics and Financial Issues, Econjournals, vol. 7(5), pages 380-388.
    10. Škuláňová Nicole, 2020. "Impact of selected determinants on the financial structure of the mining companies in the selected countries," Review of Economic Perspectives, Sciendo, vol. 20(2), pages 197-215, June.
    11. Attiya Yasmin Javid & Qaisar Imad, 2012. "A Decomposition Analysis of Capital Structure: Evidence from Pakistan’s Manufacturing Sector," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 17(1), pages 1-31, Jan-June.
    12. Pavlína Pinková, 2012. "Determinants of capital structure: evidence from the Czech automotive industry," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 60(7), pages 217-224.
    13. Muhammad Naveed, 2015. "Capital Structure Dynamics and Sensitivity Analysis: A Case of Developing Country?," Proceedings of International Academic Conferences 2603875, International Institute of Social and Economic Sciences.
    14. Pramod Sinha & Seshanwita Das, 2021. "Pattern and Trends of Financing in the Indian Manufacturing Sector," Studies in Microeconomics, , vol. 9(1), pages 105-127, June.
    15. Amit Hedau & Shailender Singh & Huwati Janor, 2018. "Determinants Of Capital Structure – A Sector Specific Approach," Romanian Economic Business Review, Romanian-American University, vol. 13(4), pages 14-30, december.
    16. Dusha Elton, 2019. "Persistent Inequality, Corruption, and Factor Productivity," The B.E. Journal of Macroeconomics, De Gruyter, vol. 19(2), pages 1-23, June.
    17. Ramachandran Azhagaiah & Candasamy Gavoury, 2011. "The Impact of Capital Structure on Profitability with Special Reference to IT Industry in India vs. Domestic Products," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 9(4 (Winter), pages 371-392.
    18. Muhammad Asif Joyo & Nawaz Ahmad & Ghulam Mustafa Shaikh, 2017. "The Role Of Business Risk And Non Debt Tax Shields On Capital Structure: A Study Based On Cement Sector In Pakistan," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 13(2), pages 36-49.
    19. Ingrid-Mihaela Dragota & Aura-Cristina Stefan-Dobrin, 2016. "An Empirical Investigation of the Firm- and Country- Specific Debt Determinants in Four Nordic Countries," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 8(2), pages 061-075, December.
    20. Yue Cheng & Christopher J. Green, 2008. "Taxes And Capital Structure: A Study Of European Companies," Manchester School, University of Manchester, vol. 76(s1), pages 85-115, September.
    21. Gál Veronika & Gáspár Katalin & Parádi-Dolgos Anett, 2014. "Regional Differences in the Capital Structure of Hungarian SMEs," Acta Universitatis Sapientiae, Economics and Business, Sciendo, vol. 2(1), pages 21-36, October.
    22. Elton Dusha, 2015. "Persistent Inequality, Corruption, and Factor Productivity," Documentos de Trabajo 319, Centro de Economía Aplicada, Universidad de Chile.
    23. Muhammad Asif Joyo & Nawaz Ahmad & Ghulam Mustafa Shaikh, 2017. "The Role Of Business Risk And Non Debt Tax Shields On Capital Structure: A Study Based On Cement Sector In Pakistan," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 13(2), pages 13-14.
    24. Halkawt Ismail Mohammed Amin & Kemal Cek, 2023. "The Effect of Golden Ratio-Based Capital Structure on Firm’s Financial Performance," Sustainability, MDPI, vol. 15(9), pages 1-25, April.

    More about this item

    Keywords

    Capital structure panel data; optimal leverage; financial markets; short term and long term debt; applied econometrics;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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