The Effect of Capital Structure on Financial Performance “Applied study in Turkish Stock Exchange”

The requirements for businesses to have an effective and efficient capital structure have become critical to the health and survival of businesses today. The goal of this research is to investigate the effect of capital structure (CS) on the company’s performance (FP). The quantitative data for the 6 years (2007-2012) was taken from the annual reports of pharmaceutical companies in the Turkish stock exchange. In this research, the assessment of measuring the independent and dependent variables was found by the regression analysis model. The dependent variable is financial performance and it is measured by return on equity (ROE) and return on assets (ROA). The independent variable is capital structure and it is measured by net profit margin (NPM), earnings per share (EPS), long-term debt to total assets (LDTA), short-term debt to total assets (SDTA) and total debt to total assets (TDTA). The correlation study empirically proves that capital structure has a positive and significant impact on the organizational performance of pharmaceutical industries listed in the Turkish stock exchange (TSX). Thus, H1 is accepted and H0 is rejected in this study. In addition, the study also recommended that firms in the Turkish pharmaceutical sector must use less long-term loans to generate cash because it will affect the organizational performance negatively.

Abstract licence: CC BY-NC

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