Market Timing and Capital Structure in the Nordic Markets

Abstract

This thesis investigates capital structures and the prevalence of market timing among publicly listed firms in the Nordic markets from 1995 to 2023. Building on Baker and Wurgler’s seminal 2002 study, Market Timing and Capital Structure, we explore how market timing behavior affects leverage across three dimensions: short-term shifts, crosssectional levels, and long-term persistence. Our findings indicate that, while equity financing is a common funding method in the Nordics, evidence of market timing behavior is limited to modest and sporadic short-term impacts. Furthermore, there is no evidence to suggest that historical market timing behavior significantly influences cross-sectional leverage or has a meaningful long-term impact.