EFFECT OF CAPITAL STRUCTURE ON CORPORATE FINANCIAL PERFORMANCE
Abstract
This study examines the relationship between capital structure and financial performance of companies, with a focus on the impact of debt-to-equity ratio on return on equity (ROE). Using a sample of 20 companies, the study employs descriptive statistics and correlation analysis to investigate the relationship between capital structure and financial performance. The results show a significant positive relationship between debt-to-equity ratio and ROE, indicating that companies with higher debt-to-equity ratios tend to have higher financial performance. However; excessive debt levels are found to harm financial performance. The study also identifies an optimal capital structure that maximizes financial performance. The findings have implications for corporate financial management, suggesting that companies should balance debt financing with equity financing to optimize financial performance.
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