Capital Structure Choices in Swedish firms

• Corporate finance theory provides a number of competing hypotheses for explaining the capital structure choice of firms. The two major ones are the ‗tradeoff‘ theory, which hypothesizes that the management of a firm seeks to achieve an optimal combination of debt and equity capital, and the ‗pecking-order‘ theory, which suggests that there is a ranking order between different types of capital making a firm‘s capital structure an aggregated result of intermittent capital structure decisions. Most empirical studies find evidence both supporting and contradicting the two theories. In this paper we present results from a comprehensive survey of capital structure choices in practice. We examine the role and importance of different firm characteristics as well as to what extent managers in Swedish firms make financial decisions in accordance with capital structure theories and are affected by concepts like optimal capital structure, financial hierarchy, windows of opportunity, signalling, asymmetric information and flexibility.

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Företagsekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Business Administration (hsv//eng)

Keyword

Corporate finance

capital structure

cost of capital

Publication and Content Type

ref (subject category)

kon (subject category)