RELATIONSHIP TREND OF CAPITAL STRUCTURE AND FINANCIAL PERFORMANCE: A SYSTEMATIC LITERATURE REVIEW

Abstract

Capital structure plays a vital role in determining the mix of debt and equity in any company, value of shareholders also get maximized with the help of balanced capital structure in which financial performance plays a significant role in determining whether capital structure has an impact on company’s performance or not. This paper highlighted the relation of capital structure with financial performance with the help of content analysis of latest five years starting from year 2018 to 2022 using keywords search in database with words highlighting “capital structure” and “financial performance”. As many empirical studies have been conducted in this regard but very rare studies are done from the perspective of theoretical framework. With the help of this research paper, systematic literature review (content analysis) is explored between capital structure and financial performance with the help of Scopus database, showing a mixture of results, as some of the variables in some countries are positively related and vice-versa. Some companies show negative relation between capital structure and financial performance and some are representing positive relation with each other. The results of the study also highlighted that more of the studies in capital structure are done in developed countries as compared to developing countries.