Capital structure and payout policies : theory and practice in Switzerland

The choices of the optimal capital structure and payout policy are important topics in corporate finance. Several theories attempt to explain differences in these corporate decisions. However, empirical studies often fail to find evidence for a particular theory. Most probably, a number of factors on the managerial, corporate, legal and taxation level influence both capital structure and payout policies. In this article, we investigate the development of capital structure and payout policies of listed firms in Switzerland from 1999 to 2012. The results indicate that debt-to-capital ratios vary across industries but are relatively stable over time. Large firms have higher debt-to-capital ratios. Furthermore, firms have made stock splits in order to increase the number of shares and reduce the shares’ nominal value. Finally, large firms exhibit higher payout ratios, and payout channels vary across firms. Legal and taxation changes had an important impact on both the capital structure and payout policies.