summary

Even though there is a wealth of research aimed at elucidating the relationship between capital structure and firm performance, empirical data produces conflicting and inconsistent results. Results and arguments are mixed. Some studies find a positive association between capital structure and business performance; others make a negative effect. Gleason et al. (2000) find that a firm's capital structure negatively affects its return on assets (ROA) and profit margin in Europe. Deesomsak et al. (2004) find a negative association between capital structure and Malaysian enterprises' gross profit margin. In Singapore, Taiwan, and Australia, leverage has a negative but minor relationship with company performance. In all nations except Singapore, where companies enjoy government backing and are less vulnerable to financial distress costs, company size has a large and favourable influence on leverage. Frank & Goyal (2004) establish a negative association between capital structure and company performance using pecking order theory vs. off theory. In seven European nations, Weill (2008) investigates the link between financial leverage and corporate performance. Financial leverage was shown to be strongly and favourably associated to company performance in Spain and Italy, as well as significantly and adversely in France, Norway, Germany, and Belgium, but insignificantly in Portugal. Financial leverage has a negative relationship with business performance assessed by return on assets, but a favourable relationship with return on equity, according to Li Meng et al. (2008). In contrast of Hadlock & James (2002) discover a link between capital structure and company performance. Profitable businesses utilise a lot of debt, they say. Holz (2002) also finds a link between capital structure and company performance.

Research questions of this case study is : (1) Are the capital structure has a negative or positive impact on the performance of firm? (2) What is the relationship between capital structure and firm performance?

1. Based on the summary, answer to the research question.

2. Write an conclusion.