Shareholder Loans in Swedish Private Equity: A Study of the Financial Implications of Shareholder Loans in Companies Owned by Private Equity

Abstract: In recent years, shareholder loans have been a debated subject in Sweden. However, no independent research into the subject has been done. This paper analyses the presence of shareholder loans in companies owned by private equity funds in Sweden.We find that shareholder loans are common. 82 percent of all companies acquired by private equity funds in 2010 and 2011 used shareholder loans as part of their financial structure. The interest rate on shareholder loans is on average 10 percent in the analysed data sample.By combining the findings in our dataset with previous research on capital structure and returns from private equity funds we find that shareholder loans on average represent approximately 8 percent of total returns.