Purpose and aim By studying swedish public companies and their annual reports through the years of 2005-2015, the purpose of this study is to determine whether there are any similarities in the capital structure of companies with homogenous market-to-book ratio and tangible assets. A comparison on industry level will also take place.
Previous research and theories The main research in this research is the previous study by Wu and Yeung about public american companies. They argue that a combination of market- to-book ratio and tangible assets can build a certain capital structure. Other previous researches are Aggarwal, who says that capital structure differ between countries and industries, and also Harris and Raviv who argue that leverage ratio is constant within the specific industry. The theories that have been used in this study are the pecking order theory, asymmetric information, market timing theory, buy-and-hold theory and financial architecture.
Methodology A quantitative method have been used, where collection of data happens through studies of companies annual reports in a similar way of Wu and Yeung. The population is all of the companies that have been publicly introduced on either Aktietorget or Nasdaq OMX Stockholm during the years of 2005-2015. The selection from the population are 77 companies.
Conclusion Swedish pharmaceutical companies who possess a high market-to-book ratio in combination with a low rate of tangible assets: are persistent within its company type (G3), finance through issues of equity, follows the market timing theory, have a leverage ratio under 10 %, have no dividends, shows a negative profitability indicator during the years 0-2, have high cash holdings and a high rate of intangible assets, have stockholders who don’t bother about dividends, have low asymmetric information between management and stockholders, and they also have stockholders who see growth opportunities with investing in pharmaceutical companies.
Keywords Capital structure, market-to-book ratio, tangible assets, pecking order, asymmetric information, swedish companies
2016. , 32 p.
Kapitalstruktur, market-to-book ratio, materiella tillgångar, penging order, informationsasymmetri, svenska företag