Background & Problem: Financing is an integral part of any business and during recent years, financing decisions has been a widely debated topic. Theories takes different stances on how firms should finance their businesses based on the implication debt and equity have, while research shows inconsistent evidence. This have resulted in a field of uncertainty and gaps for researchers to exploit.
Purpose: The purpose of the study is to investigate the relationship between capital structure and performance
Method: A purely quantitative panel-data regression study investigating 314 of the largest public and private Sweden operating manufacturers during the years 2013-2017. With ROA as a performance measurement and dependent variable, Total Debt/Total Assets as measurement for capital structure. Size, Growth and Asset Structure as control variables.
Conclusion: The results show that leverage have a significant negative relationship with ROA, during the years 2013-2017 and is consistent with the assumptions of the pecking-order theory.