The Impact of Financial Structure on Corporate Performance: Evidence from Selected EAGLEs Economies

Abstract

Financial structure selections are regarded as one of a company's most strategic and crucial choices. By effectively and appropriately implementing these choices, a business may achieve its ultimate objective: maximizing value. This study looks at how manufacturing firms in the sample EAGLE rising nations of China, India, Brazil, Indonesia, and Turkey performed between 2010 and 2019 in relation to financial structure. The financial structure indicators in this study are the short- and long-term debt ratios. In contrast, the corporate profitability indicators are the return on equity, return on assets, and earnings before interest, tax, depreciation, and amortization margin. Sales growth and firm size are included as control variables to account for firm-specific characteristics that may influence corporate performance. The study employs panel data analysis to examine the relationship between financial structure and firm performance across the selected emerging economies. The study's findings indicate that during the study period, financial leverage had a substantial detrimental effect on the performance of manufacturing firms operating in the aforementioned sample EAGLE emerging nations. In other words, a rise in debt reduces the worth of the corresponding businesses. The performance of the aforementioned companies during the study period is substantially positively connected with the control variables, which are sales growth and company size. The findings provide empirical evidence on the importance of maintaining an appropriate financial structure to improve profitability and sustain firm value in emerging markets. These findings offer practical insights for managers, investors, policymakers, and academic researchers.