A Theoretical and Empirical Study of how Capital Structure influences the Performance and Enterprise Value -A study of the Norwegian shipping industry

Abstract: This paper ought to give an introduction on the subject of capital structure and further ascertain how well Miller and Modigliani’s theorems, the tradeoff theory and the owner structure can explain the performance for the 21 listed Norwegian shipping companies. Our empirical findings suggest that our selection of companies show tendencies of following the tradeoff theory and that there is a preferred capital structure. We further observed that the capital structure have minor influence on the performance at moderate level of debt. Additionally, it was concluded that companies tend to adapt their solvency ratio depending on their earnings volatility (EBIT).