What determines the use of capital budgeting methods? : Evidence from Swedish listed companies

Purpose: This paper aims to extend and contribute to prior research on the association between company characteristics and choice of capital budgeting methods (CBMs). Design/methodology/approach: A multivariate regression analysis on questionnaire data from 2005 and 2008 is used to study which factors determine the choice of CBMs in Swedish listed companies. Findings: Our results supported hypotheses that Swedish listed companies have become more sophisticated over the years (or at least less unsophisticated) which indicates a closing of the theory-practice gap; that companies with greater leverage used payback more often; and that companies with stricter debt targets and less management ownership employed accounting rate of return more frequent. Moreover, larger companies used CBMs more often. Originality/value: The paper contributes to prior research within this field by being the first Swedish study to examine the association between use of CBMs and as many as twelve independent variables, including changes over time, by using multivariate regression analysis. The results are compared to a US and a continental European study.

Determinants of Capital Structure of Swedish limited companies : Testing Trade-off Theory Against Pecking Order Theory

Research question- This thesis investigates the determinants of capital structure of the Swedish companies. In order to do so, the two dominant theories of the corporate structure are studied and their assumptions are tested. Thus, the study researches which one of the two theories is more appealing for the Swedish market. Methodology-The study follows a purely quantitative study, by conducting an econometric analysis. The data are collected from a secondary source and more particularly the "Retriever" database, which contains financial data of the Swedish companies. Findings- The findings indicate that the determinants of the corporate structure for the Swedish market do not differ from other studies which have been conducted in other countries. However, there is a difference when it comes to tax and non-tax shields. The results suggest that in most cases the Pecking Order Theory appears to be more representative for the Swedish market, since most of the coefficient appear to be in favour of it. Moreover, the significance of the effect of the industry for the financial leverage is confirmed.