A Study on the Impact of Capital Structure on the Performance of Listed Companies

Abstract

The paper investigates the influence of capital structure on listed companies' performance, with a focus on the property sector, spanning 2010 to 2021. It delves into Modigliani-Miller theorem, factors shaping capital structure decisions, and industry-specific characteristics across various sectors like real estate, technology, and healthcare, and compares capital structure trends in developed and developing countries. The findings reveal a nuanced relationship between capital structure and performance, varying by industry and market maturity. In capital-intensive sectors, like real estate, excessive leverage correlates with diminished performance, while moderate debt levels in technology and healthcare can support innovation but excess leverage may hinder it. Developed countries tend towards balanced capital structures, whereas developing nations lean more towards debt financing. Notably, Chinese firms demonstrate superior property investment efficiency and capital structure management compared to Vietnam. Contributions include a comprehensive framework for capital structure determinants, industry-specific insights aiding firms in optimizing capital structure, empirical evidence on capital structure management in different developing nations, and highlighting capital structure's multidimensional impact on firm performance, encompassing financial risk, R&D investment, and market competitiveness. This study offers valuable guidance for firms, particularly in emerging markets like China, in devising optimal capital structure strategies tailored to industry dynamics and market conditions.