Impact of Capital Structure on Firm Performance

Abstract

The main focus of this essay is the relationship between capital structure and company performance. From three main angles, the research examines and explores how capital structure affects company performance. Previous studies were mostly focused on a specific field, lacking comparison from multiple perspectives. In order to obtain a more comprehensive understanding, this paper expands the key points of the research, mainly from the following perspectives: two different models for calculating the optimal solution (Modigliani and Miller Theory and Capital Asset Pricing Model), two representative industries (real estate industry and retail industry), and differences between countries (differences between developed and developing countries, and differences between developing countries, taking Iran and Malaysia as examples). The findings in this paper demonstrate that various models will produce various conclusions on the relationship between capital structure and firm performance, and various analytical vantage points will change capital structure and ultimately have an impact on firm performance.