Debt heterogeneity : an empirical study of debt structure determinants for the companies in the OSEBX index

Abstract

This thesis aims at investigating how firm-specific characteristics affect the debt structure, debt specialisation and debt priority structure decisions of the firms in the OSEBX index. In the period 2009-2018, we observe 54 individual firms for a total of 445 firm-year observations. The data set is unique, collected manually from the firms’ annual reports, and cross-checked with SDC Platinum. The debt outstanding is categorised in detail to provide new insights into the complexities of the debt structure. We find that while large firms do not use more leverage, they have more diversified borrowings and prefer market debt, which is senior unsecured. Profitable firms use more debt, have specialised borrowings and prefer secured private debt. Firms with high growth opportunities use less debt and avoid restrictive debt types, such as bank debt and mortgages. High growth firms also use less subordinated debt. Tangible firms use more of all debt categories except for bank debt. They have more diversified borrowings and have more access to subordinated debt. Dividend payers use less debt, driven by convertibles and export credit. Further, family-controlled firms use more debt and prefer private debt to public debt. All else equal, family-controlled firms have more diversified borrowings, and they rely on secured debt. Firms with high liquidity rely less on debt, which is mainly driven by less dependence on short term debt sources, such as bank debt. They also have more access to subordinated debt. By treating debt as heterogeneous, this thesis has analysed and uncovered previously hidden nuances of capital structure. We believe this paper provides further insight into the financing decision of Norwegian public firms.