Capital Structure Determinants An Empirical Study of Swedish Companies

Han-Suck Song ()
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Han-Suck Song: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden

No 25, Working Paper Series in Economics and Institutions of Innovation from Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

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.

Keywords: Capital structure panel data; optimal leverage; financial markets; short term and long term debt; applied econometrics (search for similar items in EconPapers)
JEL-codes: C23 C51 G32 O16 O31 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2005-01-21
New Economics Papers: this item is included in nep-cfn
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Citations: View citations in EconPapers (24)

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