Capital Structure Adjustments during Financial Distress - Exploring the Impact of COVID-19 on Swedish Publicly Traded Companies

Abstract

This study examines how publicly traded companies in Sweden adjusted their capital structures during the COVID-19 pandemic. By analyzing balanced panel data from 2017 to 2022, we explore the impact of key determinants such as tangibility, profitability, liquidity, and firm size on leverage. Our results suggest a decrease in leverage during the pandemic, contrary to previous research findings which typically show an increase in leverage during economic distress. These contradictory results underscore the unique economic and regulatory landscape in Sweden, underscoring the necessity for further research to comprehensively understand capital structure dynamics across various contexts during periods of economic distress. Such insights hold valuable implications for policymakers, investors, and business leaders seeking to navigate capital structure decisions amidst economic disruptions.