Capital Structure Pattern and Macroeconomics Conditions : A Study on the Nordic Banking Sector 2003-2008

Abstract: This study investigates the capital structure pattern on the Nordic Banking sector, and analyzes if the macroeconomics conditions have an impact on it. The topic is timely and relevant as the credit crises, which has reached the real economy strongly, appears to lead to a restructure of the capital structure of the firms. To achieve my objective I have observed the debt-to-equity ratio in the period 2003-2008. I conducted correlation analysis and further regression analysis to search for a relationship between the variables and then a cause-effect relation between the macroeconomic measures and the capital structure. In order to understand and select the macroeconomics measures to this investigation I have reviewed well known theories and studies about the subject.   I have found a stable debt-to-equity ratio on the book value; however to the market value the figures indicate a decrease in equity value, especially in the last year. In order to search for a macroeconomic relationship, I have developed hypotheses and examined them to select the most suitable variables to a regression analysis. The choice was the change in the GDP, the interest rate and tax rate.   The results revealed that the book value is better explained by these measures than the market value. They demonstrate statistical significantly, highlighting the change in GDP. Even if the findings suggest that there is a correlation between the macroeconomic condition and the capital structure, the analyses suggest only moderate relationship, that should be further investigate.