The Impact of Capital Structure on Financial Performance of the Firms: Evidence from Borsa Istanbul

Abstract

The paper tries to examine the impact of capital structure on the financial firm performance of industrial companies in Turkey. the annual financial statements of 136 industrial companies listed on I s Istanbul Stock Exchange (ISE) was used for this study which covers a period of 8 years from 2005-20012. A multivariate regression analysis is applied to test the relationship between capital structure and firm performance. To measure firm performance used indicators such as Return on Asset (ROA), Return on Equity (ROE) and Earning per Share (EPS) as well as Debt Ratio (DR) as capital structure variable. The results show that there is a negative significant relationship between capital structure and firm performance.

Keywords: Capital Structure; Firm Performance; Return On Asset; Return On Equity; Earning Per Share; Debt Ratio