The Impact of COVID-19 on Capital Structure: Evidence from the Norwegian Market

Abstract

This study examines the impact of the COVID-19 pandemic on the capital structures of Norwegian firms. The model used is a panel regression with random/fixed effects. We find that mean leverage increased by 3.32% during the COVID-19 crisis compared to pre-crisis. Post-crisis, mean leverage decreased by 1.7% compared to the crisis period. However, by examining the quarterly average leverage ratios, we observe that most industries and the overall market reduced leverage from its peak at the start of the pandemic and throughout the crisis period, before increasing leverage again post-crisis. Additionally, liquidity and tangibility demonstrate the strongest explanatory relationship to leverage ratios across all periods, with statistically significant results. Our research concludes that COVID-19 had a statistically significant impact on the capital structure of Norwegian firms listed on the main stock exchange.