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| Type | Bachelor's Thesis |
| Scope | Discipline-based scholarship |
| Title | Capital Structure Determinants of Swiss Companies: Macroeconomic Factors |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Date | 2016 |
| Abstract Text | A paper by Modigliani and Miller (1958) started the capital structure discussion and has inspired many scholars to study this field of corporate finance. Their widespread irrelevance proposition was the fundament on which many theories have evolved. Most of these theories explain the variation in capital structure through firm-specific factors that either affect the costs and benefits of debt, as in the trade-off theory or that affect the need of financing in the first place as in the pecking order theory. But not all of these factors lie in the hands of the decision-making executives. On top of firm-specific factors, costs and benefits of debt depend on macroeconomic factors. The same holds true for the need of financing, i.e. when there is an economic boom, firms might not need outside funds at all. Theories on the effect of macroeconomic factors on leverage are underdeveloped. Only recently, scholars have started to pay attention to these factors. Scholars like Hackbarth, Miao and Morellec (2006) have analyzed macroeconomic factors and concluded that the benefits and costs of debt depend on the state of the economy. Other factors that in theory should affect leverage, but are not sufficiently examined for Switzerland, are stock market conditions, expected inflation, interest rates, credit market conditions and the exchange rate of the Swiss franc to foreign currencies. This thesis describes the current state of theories, focusing on the most widespread explanations and establishes a connection to macroeconomic factors. It then focuses on relevant empirical evidence and tries to adopt this evidence to Switzerland by performing a similar analysis. |
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