How do macroeconomic factors affect capital structure? The case of Swedish firms

Abstract: Using unbalanced panel data for the sample period 2002-2012, this study investigates the relation between macroeconomic factors and the capital structure of 233 Swedish companies. Using the Random Effects model, this paper identifies the macroeconomic determinants that affect the capital structure of Swedish firms. We find that the leverage measures are positively related to the GDP Growth rate, Interest rate, Banking Credit as percentage of GDP ratio and the Stock price performance, while the Inflation rate has a negative effect on the leverage. This paper also provides evidence that banking sector is important for the Swedish firms.