How firm characteristics affect Capital Structure : An Analysis of Finnish Technology Industry
Nguyen Hoang, Linh (2014)
Lahden ammattikorkeakoulu
2014
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Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-201405025559
https://urn.fi/URN:NBN:fi:amk-201405025559
Tiivistelmä
In finance, capital structure is the concept defining the way a corporation finances its total assets using two main capital sources: debt and equity. In other words, capital structure refers to the proportions of debt and equity that a firm employs to fund its operation. Acknowledging the capital structure’s benefits, researchers have observed and defined its determinants. Many elements have been proven to influence strongly the firm’s capital structure. However, it is noticeable that different industries have different strategies in capital budgeting. As many studies have tested and revealed conflicts, the validity of theoretical determinants needs to be examined further.
This thesis aims to examine the validity of five chosen determinants selected by the author; namely, growth rate, firm’s size, profitability, liquidity and interest coverage capability, within the scope of Finnish technology firms. Particularly, the examination analyzes financial data from technology firms to either confirm or refute the assumptions of correlation between the selected determinants and capital structure. The firms which are listed in the technology sector index in OMX Helsinki Stock Exchange are selected as the object of the research.
The thesis employs the quantitative research design, which is a combination of deductive approach, quantitative method and experimental research. The data was collected from both primary and secondary sources. The primary source is mainly the financial reports of 17 firms during the period of 2008 - 2012. Meanwhile, the secondary source is obtained from books and journals.
The finding statistically confirms the positive relationship between the firm’s size and its capital structure. Furthermore, the negative relationships of the firm’s profitability and liquidity with capital structure are clarified. Meanwhile, the correlations of growth rate and interest coverage ratio with capital structure are insignificant.
This thesis aims to examine the validity of five chosen determinants selected by the author; namely, growth rate, firm’s size, profitability, liquidity and interest coverage capability, within the scope of Finnish technology firms. Particularly, the examination analyzes financial data from technology firms to either confirm or refute the assumptions of correlation between the selected determinants and capital structure. The firms which are listed in the technology sector index in OMX Helsinki Stock Exchange are selected as the object of the research.
The thesis employs the quantitative research design, which is a combination of deductive approach, quantitative method and experimental research. The data was collected from both primary and secondary sources. The primary source is mainly the financial reports of 17 firms during the period of 2008 - 2012. Meanwhile, the secondary source is obtained from books and journals.
The finding statistically confirms the positive relationship between the firm’s size and its capital structure. Furthermore, the negative relationships of the firm’s profitability and liquidity with capital structure are clarified. Meanwhile, the correlations of growth rate and interest coverage ratio with capital structure are insignificant.