Determinants of Capital Structure: An Empirical Study on Swedish FinTech Firms

Abstract: This paper aims to examine the determinants of capital structure and its effect on Swedish FinTech firms. The theoretical framework used is the trade-off theory and the pecking-order theory. Three different regression models were used on panel data to test which factors impact the types of leverage ratios of firms, as well as if there are any differences between long-term debt and short-term debt. The factors examined were size, profitability, liquidity, non-debt tax shield, age, intangibility, risk, growth, and if the firm is located in a major city or not. The study concludes with significance as firms get bigger, more profitable, have higher non-debt tax shields, and are located in major cities, have higher ratios of long-term debt and short-term debt. For firms that are more liquid and have more tangible assets, long-term debt is increased while short-term debt is decreased. The findings support both the trade-off theory and the pecking order theory.