Capital Structure in Sweden –An Investigation of the Differences between Listed Non Family-Owned Companies and Private Family Business

Abstract

Problem discussion: The choice of capital structure and its dependencies on ownership and other determinants has been discussed intensively for a couple of decades. Many opinions concerning the subject have been raised in several directions and many variables have been considered to have an impact on capital structure. Since family business make up for a large share of the world economy, it is interesting to study whether ownership has an effect on leverage levels. Myers (1984) presented two of the largest theories regarding capital structure: the static trade-­‐off theory and the pecking order theory, but none of these points out ownership structure as an important variable when determining capital structure. Contradictory, the third of the major theories, agency theory, states that family businesses will have less debt since none or only a small agency cost will exist (Jensen, Meckling, 1976). Studies made on foreign market have supported the agency theory Purpose: Since most previous research is made outside of the Swedish market, the purpose of this thesis is to investigate and present an analysis of the possible correlation between capital structure and ownership structure in Swedish companies. Delimitations: This study is limited to be valid to the Swedish market and to companies that are listed, or equal in size to firms listed, on the Small-­‐ and Mid-­‐Cap of the Nasdaq OMX Stockholm Stock Exchange. Further, the study is limited to comment on ownership, liquidity, return on assets and return on capital employed as variables that affect capital structure. Methodology: With a cross-­‐sectional quantitative study we have researched private family businesses and listed not family-­‐owned firms. Empirical data was collected from annual reports covering a five-­‐year period between 2006 and 2010 and thereafter statistical testing was performed. Conclusion: No statistically significant difference in capital structure can be found between family-­‐owned private and not family-­‐owned listed firms. This result is not in accordance with most theories but could be explained by the fact that Sweden is a bank-­‐oriented economy (Lööf, 2004). According to Antoniou, Guney and Paudyal (2008), this fact implies a high leverage level independent from ownership. Proposals for further research: Since the study behind this thesis was not in line with what the theories would suggest, it becomes even more interesting to investigate the field further. There is a lack of research performed on the Swedish market and therefore, additional research is needed. We suggest that both additional quantitative and qualitative research is performed.