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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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    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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