Access to Capital and its Effect on Capital Structures, Leverage Deficits, and Acquisition Probabilities
Master thesis
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Date
2019Metadata
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- Master of Science [1612]
Abstract
By using a large sample of Norwegian public and private firms, we study the effect
of access to public equity markets on the firm’s capital structure, leverage deficit,
and acquisition probability. We find that publicly listed firms use less debt
financing compared to private firms and conclude that this is driven by the higher
costs of asymmetric information facing unlisted firms. Next, we provide evidence
that both types of firms have target capital structures and show that access to capital
enables listed firms to rebalance their leverage ratio quicker towards this target
compared to unlisted ones. Finally, we present evidence against the free cash flow
theory as we find that underleveraging significantly reduces the likelihood of
undertaking acquisitions. We show that access to capital has no significant effect
on this relationship between the leverage deficit and the acquisition probability.
Description
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2019