Capital Structure: An Empirical Study of Capital Structure Optimization for Coloplast A/S

Abstract

This thesis investigates, how modern capital structure theories can be applied to optimize the capital structure of Coloplast A/S, with the objective to minimize the company’s weighted average cost of capital and thereby maximizing the firm value. Using a case-based approach, the study seeks to integrate theoretical modelling with empirical financial analysis to examine discrepancies between Coloplast’s actual capital structure and the theoretically optimal capital structure. The theoretical foundation of the thesis includes classical frameworks like Miller and Modigliani’s propositions, the trade-off theory and financial behavioral frameworks such as the signaling theory and principal-agent theory. Through an analysis of Coloplast’s financial statements and a cost of capital estimation, the thesis reveals a historical conservative financing strategy characterized by low financial leverage compared to the theoretical optimal capital structure. While a greater utilization of financial leverage, could result in lower weighted average cost of capital, the thesis that the capital structure decisions are influenced by non-financial considerations, such as market signaling effects. The thesis aims to contribute to a nuanced understanding of how theory and corporate practice intersects in real-world decision making.