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This dissertation studies the impact of business relations on firms' financing decisions. The goal is to understand the determinants of business relations and how they interact with firms' capital structure. In the first chapter, I present a model which studies the role of customer risk in suppliers' financing choice. The base model predicts that when faced with a high-risk customer, suppliers with significant continuation values prefer equity over debt. The extended model allows for analyzing the supplier's decision to concentrate on a single major customer or diversify into multiple customers. The model shows that by decreasing the risk of premature liquidation, diversification allows for the supplier to take advantage of the bargaining benefits of debt. The second chapter empirically investigates the impact of customer risk on suppliers' capital structure. Consistent with the model presented in the first chapter, both cross-sectional and time-series regression results show that customer risk has a negative impact on suppliers' debt financing. Customer risk is an important determinant of suppliers' method of financing as well. During the first two years of the relationship, suppliers with high-risk customers are more likely to raise equity. Comparing the impact of customer risk on different supplier groups shows that firms that operate in concentrated industries and younger firms are more sensitive to changes in customer risk. In further analyses I find that the risk is transferred from customers to suppliers: There is a lead-lag relationship between customer and supplier credit rating changes. Also, suppliers experience an increase in volatility of their stock returns after they start a new relationship with a risky customer. Results from further analyses are suggestive of customer risk affecting capital structure through its impact on supplier risk. / text

For the past forty-two years, the debate has raged over the optimal use of debt in the firm?s capital structure. Numerous studies have looked at the factors that affect a firm?s capital structure, in both the domestic and foreign markets. Many of these studies have focused their attention on the U.S. and developed countries. Similarities and differences between the U.S. and other industrialized countries have been explored and noted. The objective of this study is to determine if there are similarities between the factors that determine capital structure in emerging markets and those of more developed nations. Are the determining factors different for emerging markets and what are possible explanations for these difference? This study attempts to determine if factors that have been shown to influence the capital structure of developed nations are, in fact, influential in emerging market. The study also incorporates additional factors that may be particular to emerging markets to determine if they have an impact of the firm?s choice of capital structure. This study finds that capital structure determinants are more portable to firms in Asian markets than in Latin American markets. The study also finds that the means by which debt is measure does, in fact, have a bearing on the significance of the explanatory variables.

Thesis (M.M. (Finance & Investment))--University of the Witwatersrand, Faculty of Commerce, Law and Management, Graduate School of Business Administration, 2013. / This study seeks to establish determinants of capital structure for the projects funded by international financial institutions using IFAD projects as case studies. Specifically, we seek to find out the determinants of capital structure for projects funded by IFAD; the correlation between the life span of the project and its total budget; the correlation between the total capital and the number of households directly benefiting from the project; and the correlation between the country’s capacity of mobilizing loans and grants with its level of political stability, level of accountability, government effectiveness and the control of corruption. Data from 81 projects funded by IFAD between 1999 and 2011 in Sub-Saharan Africa (SSA), Middle-East and North Africa (MENA) region, Asia and South America was collected. The determinants were then examined from the distinctions of firm specific and country specific groupings and analyzed using a least-square dummy variable (LSDV) approach to reveal the regional-effects. The correlation analysis revealed that the association between total capital and the duration of the project is insignificant ( ) whereas between the total capital and the number of beneficiary households is highly and positively correlated with and . In addition, correlation between total capital and the level of Political Stability, the Voice and Accountability, and the level of Corruption is insignificant. Moreover, the results of LSDV showed that the number of benefiting household is a highly significant determinant of the NPOs capital structure ( ) together with Voice and Accountability ( ) as well as Corruption ( ). In contrast, project duration and the level of political stability were not important determinants of capital structure. The results of this analysis provide confirmatory evidence that the size of the project has a highly positive effect on the size of the capital, but significantly negative on the ability to borrow whereas only voice and accountability together with control of corruption have a significant relationship with the ability to mobilize capital for the project. Therefore, we conclude that the corporate capital structure theory, that is mostly applied in the business firms, is still applicable in iv project finance but with exceptions. Therefore, we implore that more studies should be done focusing on different types of NPOs to firmly understand the determinants of debt in NPOs.

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Capital structure has been a widely discussed subject among researchers, but no clear-cut answer regarding the optimal level has yet been provided. A great amount of previous researchers has studied how main theories, such as Modigliani and Miller´s “irrelevance of capital structure”, perform in real life and an extensive amount of studies have been made on the conceptual link between capital structure and performance. Although the majority of previous studies have been conducted on international public firms, less attention has been given to private firms in Sweden. Therefore, the purpose of this study is to investigate the association between capital structure in Swedish unlisted firms and performance. Furthermore, this study aims to investigate whether the location of the firm influence this relationship. In line with previous research, this study use a robust regression model and a random effect model to analyze a sample of 7444 unlisted Swedish firms, operating in 28 industries, in 21 different locations, during the time period 2009-2014. Return on assets is used as a proxy for performance and capital structure is defined as total, short term and long term debt scaled to total assets respectively. Our results show that there is a negative association between capital structure and performance and thereby reveals results in line with the pecking order theory. This implies that high levels of debt seems to increase the cost of outside financing in the presence of asymmetric information, which will make managers of private firms in Sweden more likely to use inside finance to acquire capital for their operations. Furthermore, a concave association between capital structure and performance is tested for total debt and short term debt in line with the agency cost theory. This result is also significant and provides reasons to assume that there might be an optimal capital structure in private firms in Sweden. To the authors’ best knowledge this study is one of the first to examine a concave relationship between capital structure and performance on private listed firms in Sweden as well as finding a significant impact of location on this association. In our additional analysis we also observe that the relationship between capital structure and performance is significantly different in Stockholm, Västra Götaland and Skåne in comparison to firms located in other places.