Capital Structure and Firm Performance: A Comparative Study

Abstract

Capital structure plays a significant role in determining the financial stability and overall performance of a firm. It refers to the proportion of debt and equity used by a company to finance its operations and growth. The relationship between capital structure and firm performance through a comparative analysis of selected companies across different sectors. The research focuses on evaluating how varying levels of debt and equity influence profitability, operational efficiency, and market performance. financial indicators such as Return on Assets (ROA), Return on Equity (ROE), Earnings per Share (EPS), and Debt-to-Equity Ratio to measure firm performance and capital structure efficiency. Secondary data collected from annual reports, financial statements, and published corporate records form the basis of the analysis. The comparative approach helps identify similarities and differences in financing strategies adopted by firms and their impact on financial outcomes. an optimal balance between debt and equity contributes positively to firm performance, while excessive dependence on debt may increase financial risk and reduce profitability. the effect of capital structure varies across industries due to differences in operational requirements, market conditions, and management policies. effective capital structure management is essential for achieving long-term financial sustainability and maximizing shareholder wealth.