An empirical study of the financing choices of Norwegian companies.

The project will seek to obtain an improved understanding of how Norwegian companies, focusing on private companies, finance themselves. We will test known capital structure theories on very complete and relevant data and also utilise the benefits of the Norwegian framework. The latter in particular regards the near neutral effect from taxes on the overall cost of debt as from 1992. The results will be compared to recent empirical papers internationally. The Norwegian setting is unique in that we have access to a complete database of financial accounts for all companies for the period 1992-2004, Statistics Norway provides supplementary information using the same company identifiers and we also have a unique dataset on founders of a large sample of rece ntly founded companies. The strength of the project is that we can study a whole-country company data-set which will make the issue of sample-bias irrelevant. It is, however, always a challenge to study capital structure decisions using the accounts f or private companies. These companies have usually less informative accounts and lack any market values which limits the theoretical usefulness of the data. The project will consist of three main parts: A: Description and basic tests. This will cover the capital structure of all Norwegian companies by industry, using various leverage measures, over time and adjusting for rented assets/liabilities. Regular control variables will also be applied. In this section, the data will be positioned into a bro ader research context both theoretically and empirically. B: Start-ups. We will use a unique dataset of app. 3500 new companies established by individuals in combination with tax-filing and accounting data. New companies have no path-dependence in their financing and thus allows for purer tests of financing. C: Marginal financing Using a set of loan-applications from a regional bank, we will study companies' financing objectives and outcomes.