Kapitalstruktur og virksomhedsperformance: Empirisk undersøgelse af det danske børsmarked

Abstract

Research on companies’ financing decisions is a saturated field, but the findings continue to seem divergent in explaining the relationship between capital structures and firm performance. Various markets have been examined in this context, but the relationship is still unexplored on the developed Danish market.

This thesis examines the relationship between capital structure and firm performance in Danish companies listed on the Danish stock exchange. Capital structure is defined as the share of debt as a means of financing the company and performance is defined as financial performance. Based on previous acknowledged similar research, the terms capital structure and firm performance are each defined through multiple variables.

The thesis uses unbalanced panel data consisting of yearly observations on 155 Danish companies listed in the period from 2001 to 2021, totaling 1850 observations. The relationship between capital structure and firm performance is tested linearly through a Fixed Effects multiple regression model, keeping time- and company effects fixed.
The regression analysis finds a significant negative relationship between all capital structure measures and accounting-based performance measures, ROE and ROA. Contrary to this, the market measure, Tobin’s Q, shows a positive significant relationship with most capital structure measures.

Furthermore, the thesis tests the relationship split over three even-sized time periods. This proves no change in the sign of the relationships in any period, as well as little change in significance levels. It does, however, highlight significant differences in the slope of the parameter estimates for some of the models, both with accounting- and market-based performance measures. This indicates to be a result of macroeconomic factors, such as interest and economic growth, GDP.
The thesis thus concludes a significant negative relationship between capital structure and performance measured through accounting terms, which is in line with previous similar studies and the Pecking Order Theory. However, market-defined performance suggests a positive relationship with capital structure, which is unaligned with previous studies, but indicates to be strong over time in this thesis.