The Impact of COVID-19 on Corporate Capital Structure : An empirical evaluation on the pandemic in a Swedish context

Abstract: This study has strived to explore how capital structure in Swedish corporations has been affected by the COVID-19 pandemic. The study has employed both a panel regression with fixed and random effects estimation as well as a dynamic panel regression with Arellano-Bond estimators. The model utilizes common and appropriate capital structure determinants to investigate how leverage has changed between a pre-crisis and crisis sample. Even though the results have proven to be relatively scattered they have indicated that corporate leverage has increased in the crisis period. Furthermore, this study examined how corporate size (market capitalization) and industry has impacted the capital structure. The results suggest that industries such as consumer goods and services have experienced a higher degree of influence in comparison to industries such as healthcare. The evidence also suggests several significant relationships such as between tangibility and leverage as well as an overall general inclination towards the Pecking-Order Theory. Additionally, the rate of adjustment of the corporate leverage prior to the crisis was comparable to that of the 2007/08 financial crisis, but did ultimately not undergo a dramatic change similar to the financial crisis found in previous research.