Determinants of capital structure in the Norwegian salmon aquaculture industry

Abstract

Determinants of firm-level capital structure in the Norwegian salmon farming industry, which is a highly cyclical industry, are investigated with an emphasis on differences between listed and private companies. Capital structure is represented by long- and short-term debt, total debt, and liquidity. Using a unique panel data set of all Norwegian salmon farming companies, the econometric results show that profitability is negatively linked to short-term and total debt, and positively associated with liquidity; i.e., growth firms have lower liquidity. The listed firms rely less on long- and short-term debt (and hence total debt) than do unlisted firms, and have higher liquidity, which may reduce their bankruptcy risk, but can lead to a lower return. The results are reviewed in light of the theories of capital structure and should be useful for salmon farming companies and firms in other cyclical industries to evaluate the benefits of going public.