Impact of Capital Structure on Firms Performance: Evidence From Sample Nests Emerging Countries

Making correct and effective decisions on the capital structure by influencing capital costs can play an important role in improving the company's performance and increasing its value. Therefore, companies considering the capital structure important, by using an effective combination of financing sources, seek to achieve their main goals, which is to maximize the value of the company. This study aims to investigate the impact of capital structure on the performance of companies operating in the five sample NEST emerging countries (Poland, Thailand, Sri Lanka, Saudi Arabia, and Chile) throughout 2010-2019. In this study, a multiple regression model has been used to examine the effects of high financial leverage on company performance. In this paper for defining the capital structure each of the short-term debt (STD) and long-term debt (LTD) indicators and for the operating performance of mentioned companies, each of the indicators of return on asset (ROA), return on equity (ROE), and earnings before interest, tax, depreciation, and amortization (EBITDA) margin have been used. The findings of this study show that the financial leverage and performance of these companies in all sample NEST emerging countries are negatively associated; any increase in the level of debt in the capital structure of these companies causes damage to their operating performance and lowers the value of mentioned firms.