Exploring the Influence of Firm Size on Leverage Evidence from OMX Stockholm Small Cap

Abstract: This study examines the relationship between leverage and firm size for a sample of 83 firms listed on OMX Stockholm Small Cap between 2018 and 2022. Additionally, it explores the impact of the Covid-19 crisis on this relationship through quarters experiencing negative GDP growth. This study uses panel data and a random effects model to reveal a positive and statistically significant association between different leverage ratios and firm size. However, the actual economic impact of firm size on leverage was found to be minimal. This study, instead, identifies other factors, namely asset tangibility, as having a greater influence on the capital structure of smaller Swedish firms. These findings shed light on the complex dynamics of capital structure decisions and highlight the importance of considering multiple factors beyond firm size alone.