During the past decades, explanation of capital structures through firm-specific performance variables has increasingly drawn the attention of researchers (for example Kester, 1986; Friend and Lang,1988; Titman & Wessels,1988; Rajan and Zingales,1995: Wald,1999: Ozkan,2001; Zou & Xiao, 2006). In fact, the researchers have attempted to explain how selected firm-specific performance variables - often drawn from the context of annual reports - have affected the outgrowths of various capital structures. The resulting capital structures have often been used to make either comparisons between the two sets of companies or explaining the changes of capital structure over time. However, a focus on the processes of these researches reveals that for the studies of capital structures different methods were applied. In addition to this, the choice of variables was not methodologically reasoned. As a consequence, explanations of the outgrowth of the capital structures appeared being highly ambiguous and paradoxical. This study examines the problem attached to the choices and definitions of variables. It has the intension to demonstrate that rules applied for the selection, definitions, and measurements of the variables are the main causes to the ambiguous and paradoxical results of the past research on capital structure. By reviewing a number of prior empirical researches, this study reveals some inconsistency arising from the failure to apply a common rule in definitions, selections and measurement of the variables.

Purpose: The purpose of this study is to understand the growth of a quasi-market industry and the distribution of capital generated by the industry´s private companies.

Methodology: Using a longitudinal case study approach, descriptive panel data and a regression analysis highlight the development of medium-sized Swedish companies within the personal care assistance (PA) industry.

Findings: This study demonstrates a quasi-market growth cycle and how the hierarchical organizational dimension explains key figure differences between the business types of independent firms (undivisionalized) and conglomerate subsidiaries.

Originality: This study is the first to reveal that quasi-market conditions open up for broad redistributions of capital to non-related conglomerate-owned industries. Thereby, non-intended industries receive public funding advantages.