Since the publication of Modigliani and Millers original theorem on capital structure, researchers have tried to find explanations to firms’ capital structure decision. The literature has been rather ambiguous, and the two main fields of thought is the predictions of the trade-off theory and the pecking order theory. Previous research finds empirical evidence supporting both theories, which is why the subject is an interesting field for further research. The literature on capital structure in a Swedish context is limited and could therefore benefit from further research in a time plagued by the adverse economic setting which is due to the covid pandemic. That is why this study’s aim were to examine the potential effects the pandemic had on firms’ capital structure decision. The study tests the effects on firms’ total leverage ratio as well as the effects on different debt maturities by including long- and short-term leverage ratios. Due to the characteristics of the pandemic the study aims to show the industry specific effects as well. We adopted a positivistic research paradigm when conducting this quantitative study with a deductive research approach. When collecting data, Refinitiv Eikon provided us with a population of 914 publicly traded Swedish firms. Due to data drop off the final sample that was used in the statistical analysis amounted to 450 firms, which were deemed to be sufficient to provide generalizable results for the population. This study was unsuccessful in proving that the pandemic had any significant effect on public Swedish firms’ capital structure in any of the leverage ratios. We can however prove that the pandemic had a significant effect on individual industry’s capital structure. This thesis can also provide evidence that Swedish firms to some extent follow the pecking order theory. Our results suggest that firms deleverage as they grow, which is in line with said theory. On industry level we find proof for both the trade-off theory and pecking order theory, indicating that certain industries are affected differently depending on specific characteristics of their operations. We find evidence of both theories when assessing the profitability of firms. These ambiguous results could motivate further research on the subject in a Swedish context.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:umu-227463 |
| Date | January 2024 |
| Creators | Lif, Erik, Johansson-Märsylä, Eric |
| Publisher | Umeå universitet, Företagsekonomi |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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