Capital Structure Impact on Financial Performance of Kurdistan Manufacturing Firms

Abstract

The research objective was to establish effects of capital structure on the performance in financial perspective of Kurdistan manufacturing firms. Theoretically it is assumed that the capital mix a firm uses to finance its operations does not matter and that its future operating income generated by its asset is what determines its value. Multiple linear regression which included return on equity as independent variable, capital structure, liquidity, size and growth as the independent variables. These variables were used to establish whether capital structure decisions affect profitability of manufacturing firms in Kurdistan. The results obtained from the regression equations established a negative relation between total debt, size and financial performance which indicates using more of debt or assets are linked to a decrease in performance in financial perspective. The study further found out that financial performance increased with increase in liquidity and sales growth. From the findings outlined above, the study recommends that companies should consider borrowing less funds and use internal funds economically.