Financing the future

: how electrification shapes capital structure decisions in the automotive industry

Abstract

This study examines the impact of electrification on the capital structure decisions of car manufacturers, addressing a gap in the literature on financial strategies during technological transitions. While traditional capital structure theories have explored firm-specific and macroeconomic determinants of leverage, little research has been conducted on how major industry shifts4 particularly the transition to electric vehicles (EVs)4affect firms' financing choices. Using a dataset covering 30 global automakers from 2014 to 2023, this study employs regression analysis to assess the relationship between electrification and leverage. The results indicate that electrification does not reduce leverage but instead influences debt structure. Firms shifting toward electrified vehicle production decrease their long-term debt while increasing their use of short-term debt. This finding aligns with prior research on technological change, which suggests that declining asset tangibility and increased financial uncertainty lead firms to adopt more flexible financing strategies. These findings contribute to the literature by providing empirical evidence that technological disruption influences not overall total leverage levels but rather debt maturity structures. The study also provides practical insights for industry leaders, investors, and policymakers. By bridging the gap between capital structure theory and technological change, this research offers a foundation for future studies on financial strategies in rapidly evolving industries. Understanding the financial implications of electrification is essential for ensuring the long-term sustainability and competitiveness of automotive manufacturers in the global market.

Date of Award	4 Jul 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Aviner Manoel (Supervisor)