Capital Structure Decisions and Financial Performance: A Post-Crisis Perspective

This study examines the relationship between capital structure and financial performance amongst firms constituting the Dow Jones Industrial Average (DJIA) over the period 2009 to 2020. Utilising secondary data from the Bloomberg database and employing standardised multiple linear regression, the study analyses the influence of the Total Debt to Total Equity (TDTE) ratio on two performance indicators: Earnings Per Share (EPS) and Return on Equity (ROE). Macroeconomic controls, including inflation, tax rate, GDP growth, and current account balance, were incorporated into both model specifications. The findings indicate that TDTE did not exert a statistically significant effect on either EPS or ROE. Firm size, however, emerged as a significant positive determinant of EPS, whilst the statutory tax rate exhibited a significant negative association. These results suggest that, in the post-crisis environment, operational scale and conservative financing practices were more consequential than leverage in shaping financial performance.