Capital structure and agency costs for Norwegian private firms

Abstract

This paper is motivated by the developments of capital structure theory, and the fact that private firms have been modestly researched in this field. The paper examines whether agency costs influence the capital structure of Norwegian private firms, and to what extent. The predictions of agency costs are tested for firms with dispersed and concentrated ownership structure. This paper finds support for the agency theory proposing that firms with dispersed ownership has a higher level of leverage than firms with concentrated ownership. However, the support of agency theory is not consistent. Instead, the findings support an alternative capital structure theory, the pecking order theory.